Becker Brown Bag – Evaluating Medicaid Managed Care Plans Using Random Assignment

BFI’s Becker Brown Bag Series invites prominent economists to present cutting-edge research and engage MBA, undergraduate, and other students studying economics in discussion. The talks highlight the practical use of economics for answering real-world questions pertinent to businesses and policy makers.

As of 2018, more than 50 million Americans were enrolled in Medicaid managed care plans. These plans, which are designed to reduce cost and improve health outcomes, can vary greatly both in structure and in their potential outcomes. In this Becker Brown Bag lecture, Prof. Matthew Notowidigdo shared research examining the effect of health care plan assignment on health care utilization, spending and “effectiveness,” offering pivotal clues for how to reduce healthcare costs and improve health outcomes. Notowidigdo and co-authors use the random assignment of more than 100,000 households in South Carolina to different Medicaid managed care plans and find large differences in plan effects across many different health care categories, including ER visits, inpatient hospitalizations, well-child doctor visits, and cancer screenings. They find evidence of a large amount of selection bias and show that incorporating randomization can help improve the incentives for plans to increase quality and reduce costs, as well as help households make more informed plan choices.