More on Medicare & Medicaid

Low-spending Medicaid managed care plans lead to negative health outcomes, research suggests

Individuals enrolled in low-spending plans generated less healthcare spending, used high-value drugs and services less and were less satisfied.

Low-spending Medicaid managed care plans result in reduced healthcare spending and utilization, decreased consumer satisfaction and increased avoidable hospitalizations, according to research from the National Bureau of Economic Research.

"In sum, there is no indication that low-spending plans achieve savings by promoting high-value care and achieving offsets or by targeting low-value care for elimination. Instead, similar to what happens when consumers face a high deductible, supply-side managed care tools appear to constrain virtually all types of care," researchers said in the report.

The purpose of this study was to identify the relationship between what kind of health plan a beneficiary enrolls into and their healthcare utilization, quality of care and satisfaction.

To do so, researchers examined the New York City Medicaid managed care market that consists of 10 different plans with no cost-sharing from 2008 to 2012. Beneficiaries who did not actively select a plan during the choice period were randomly assigned to one.


Researchers found that if an individual was enrolled in the lowest-spending plan, they would generate about 30% less in healthcare spending compared to being enrolled in the highest-spending plan.

Low-spending plans were found to reduce the utilization of high-value drugs like those used to treat diabetes, asthma and mental illnesses, as well as the use of high-value screenings for diabetes, cancer and sexually transmitted infections.

"This is inconsistent with the idea that lower-spending plans use scalpel-like tools to reduce inefficient spending while improving or maintaining the provision of high-value care: For many of these drugs non-adherence can result in health deterioration and expensive hospitalizations," researchers said.

Enrollment in low-spending plans was found to significantly reduce the use of recommended preventative care. The study used rates for HbA1c testing, breast cancer screening, cervical cancer screening and chlamydia screening and found that, for all but breast cancer screenings, beneficiaries in low-spending plans were less likely to be screened.

Beneficiaries enrolled in low-spending plans typically had decreased consumer satisfaction, according to the report. Results indicated that people were less likely to stay in lower-spending plans and were conversely more likely to stay in high-spending plans.

Lastly, the low-spending plans were found to increase avoidable hospitalizations, because enrollees in those plans were 16% more likely to go to the hospital for something that could have been prevented.

"This result suggests that the tools used by low-spending plans to constrain costs could have negative consequences for beneficiary health," researchers said in the report.


Other research into healthcare spending, like the RAND Health Insurance Experiment, have looked into patient cost-sharing to find that it is a "blunt instrument, affecting the use of low- and high-value services alike," researchers in the NBER report said.

Those previous studies triggered questions as to whether managed care tools could offer solutions to inefficient spending and high-spending patient management.

But, as the NBER researchers found, managed care tools are also blunt.


"But our results, along with prior work studying managed care in Medicare, indicate that supply-side tools exhibit many of the same features and limitations as demand-side tools," researchers said in the report. "Their impacts on healthcare spending are blunt. They indiscriminately reduce utilization, limiting both high- and low-value care rather than targeting 'waste.'"

Twitter: @HackettMallory
Email the writer: