Do Insurers Risk-Select Against Each Other? Evidence from Medicaid and Implications for Health Reform / Ilyana Kuziemko, Katherine Meckel, Maya Rossin-Slater.

Format:

Book

Author/Creator:

Kuziemko, Ilyana.

Contributor:

National Bureau of Economic Research.

Meckel, Katherine.

Rossin-Slater, Maya.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19198.

NBER working paper series no. w19198

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

Increasingly in U.S. public insurance programs, the state finances and regulates competing, capitated private health plans but does not itself directly insure beneficiaries through a public fee-for-service (FFS) plan. We develop a simple model of risk-selection in such settings. Capitation incentivizes insurers to retain low-cost clients and thus improve their care relative to high-cost clients, who they prefer would switch to a competitor. We test this prediction using county transitions from FFS Medicaid to capitated Medicaid managed care (MMC) for pregnant women and infants. We first document the large health disparities and corresponding cost differences between blacks and Hispanics (who make up the large majority of Medicaid enrollees in our data), with black births costing nearly double that of Hispanics. Consistent with the model, black-Hispanic infant health disparities widen under MMC (e.g., the black-Hispanic mortality gap grows by 42 percent) and black mothers' pre-natal care worsens relative to that of Hispanics. Remarkably, black birth rates fall (and abortions rise) significantly after MMC--consistent with mothers reacting to poor care by reducing fertility or plans discouraging births from high-cost groups. Implications for the ACA exchanges are discussed

Notes:

Print version record

July 2013.