Does managed care produce lower health care utilization and costs through better aligned financial incentives and alternative delivery methods (the “pure” HMO effect) or by attracting more healthy enrollees (enrollee selection)? The purpose of this paper is to shed new light on this fundamental question using a quasi-experimental approach that exploits the timing and county specific implementation of Medicaid managed care plans in two distinct sub-sets of Kentucky counties in the late 1990s.
US states provide both cash and health insurance benefits for the poor, partially financed by fiscal transfers from the Federal government. The 1996 welfare reform drastically reduces Federal support for cash transfers at the margin, lowering the relative price to states of providing benefits to the poor through Medicaid.
This paper examines the introduction of premiums into the SCHIP program in Kentucky. Kentucky introduced a $20 monthly premium for SCHIP coverage for children with family incomes between 151% and 200% of the federal poverty level in December 2003. Administrative data between 2001 and 2004 is used to estimate a Cox proportional hazard model that predicts enrollment duration in this premium-paying category. The results suggest that a premium reduces the length of enrollment and that the effect is much stronger in the first two months after the introduction of the premium.