From 1991 to 2009, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 71 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local-level MMC mandates and detailed data from the Centers for Medicare and Medicaid Services (CMS) on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not on average reduce Medicaid spending. If anything, our results suggest that the shift to MMC increased Medicaid spending and that this effect was especially present for risk-based HMOs. However, the effects of the shift to MMC on Medicaid spending varied significantly across states as a function of the generosity of the state's baseline Medicaid provider reimbursement rates. 1 Abstract From 1991 to 2009, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 71 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local level MMC mandates and detailed data from CMS on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not reduce Medicaid spending in the typical state. If anything, our results suggest that the shift to MMC increased Medicaid spending and that this effect was especially present for risk-based HMOs. However, the effects of the shift to MMC on Medicaid spending varied significantly across states as a function of the generosity of the state's baseline Medicaid provider reimbursement rates.JEL Classification: H51, H72, I11, I18, L33

From 1991 to 2009, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 71 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local-level MMC mandates and detailed data from the Centers for Medicare and Medicaid Services (CMS) on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not on average reduce Medicaid spending. If anything, our results suggest that the shift to MMC increased Medicaid spending and that this effect was especially present for risk-based HMOs. However, the effects of the shift to MMC on Medicaid spending varied significantly across states as a function of the generosity of the state's baseline Medicaid provider reimbursement rates. 1 Abstract From 1991 to 2009, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 71 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local level MMC mandates and detailed data from CMS on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not reduce Medicaid spending in the typical state. If anything, our results suggest that the shift to MMC increased Medicaid spending and that this effect was especially present for risk-based HMOs. However, the effects of the shift to MMC on Medicaid spending varied significantly across states as a function of the generosity of the state's baseline Medicaid provider reimbursement rates.JEL Classification: H51, H72, I11, I18, L33

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Objective. To analyze the impact of hospital mergers on treatment intensity and health outcomes. Data. Hospital inpatient data from California for 1990 through 2006, encompassing 40 mergers. Study Design. I used a geographic-based IV approach to determine the effect of a zip code's exposure to a merger. The merged facility's market share represents exposure, instrumented with combined premerge shares. Additional specifications include Herfindahl Index (HHI), instrumented with predicted change in HHI.Results. The primary specification results indicate that merger completion is associated with a 3.7 percent increase in the utilization of bypass surgery and angioplasty and a 1.7 percent increase in inpatient mortality above averages in 2000 for the average zip code. Isolating the competition mechanism mutes the treatment intensity result slightly, but it more than doubles the merger exposure effect on inpatient mortality to a 3.9 percent increase. The competition mechanism is associated with a sizeable increase in number of procedures. Conclusions. Unlike previous studies, this analysis finds that hospital mergers are associated with increased treatment intensity and higher inpatient mortality rates among heart disease patients. Access to additional outcome measures such as 30-day mortality and readmission rates might shed additional light on whether the relationship between these outcomes is causal. Key Words. Hospitals, mergers, quality Consolidation is a common response to financial and competitive pressures in many markets. The primary concern is often financial: will the merger increase prices? The health care sector involves additional complications. For example, both dimensions of demand for health care services are affected by third parties: treatments are prescribed by physicians while health insurance shields consumers from the full costs of care. Prices do not reflect their demand curve but are instead set by the insurer for public

Medicare adjusts payments to Medicare Advantage (MA) insurers using risk scores that summarize the relationship between fee-for-service (FFS) Medicare spending and beneficiaries’ demographic characteristics and documented health conditions. Research shows that MA insurers have increasingly documented conditions more thoroughly than traditional Medicare—resulting in higher payments to insurers—but little is known about what factors contribute to diverging risk scores. We apportion that divergence between market-wide increases and increases that vary with length of MA enrollment. We also examine whether effects vary across plan types and whether the enrollment duration effect is contingent upon remaining with the same insurer. Using Medicare administrative data from 2008 to 2013, we employ a difference-in-differences model to compare the growth in risk scores of Medicare beneficiaries who switch from FFS to MA to that of beneficiaries who remain in FFS. We find that the effect of MA enrollment on risk scores increased from 5% in 2009 to 8% in 2012 and that continuous enrollment in MA was associated with an additional 1.2% increase per year, regardless of continuous enrollment with an insurer. Thus, even among those who switched to MA in 2009, enrollment duration comprised less than one-third of the coding intensity difference in 2012. We also find that risk scores grew faster in areas with greater MA penetration and among Health Maintenance Organization enrollees. Overall, our findings suggest that market-wide factors contributed most to the increasing divergence between FFS and MA risk scores.