Working Paper: NBER ID: w20462
Authors: Jonathan Gruber; Robin McKnight
Abstract: Recent years have seen enormous growth in limited network plans that restrict patient choice of provider, particularly through state exchanges under the ACA. Opposition to such plans is based on concerns that restrictions on provider choice will harm patient care. We explore this issue in the context of the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major financial incentive to choose limited network plans for one group of enrollees and not another. We use a quasi-experimental analysis based on the universe of claims data over a three-year period for GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state's three month "premium holiday" for limited network plans leading 10% of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions in quantity of services used and prices paid per service. But spending on primary care actually rose for switchers; the reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms. We find that distance traveled falls for primary care and rises for tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients. The basic results hold even for the sickest patients, suggesting that limited network plans are saving money by directing care towards primary care and away from downstream spending. We find such savings only for those whose primary care physicians are included in limited network plans, however, suggesting that networks that are particularly restrictive on primary care access may fare less well than those that impose only stronger downstream restrictions.
Keywords: health care costs; limited network plans; insurance; Massachusetts; state employees
JEL Codes: I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial incentives (M52) | Enrollment decisions (I23) |
| Three-month premium holiday (G52) | Enrollment in limited network plans (D85) |
| Switching to limited network plans (D45) | Reduction in spending for marginal complier (D61) |
| Reduction in spending (H61) | Reduced quantities of services used (H49) |
| Reduction in spending (H61) | Lower prices per service (D49) |
| Switching to limited network plans (D45) | Increase in primary care visits (I11) |
| Distance traveled for primary care (I11) | Decrease (E31) |
| Distance traveled for tertiary care (I11) | Increase (O42) |
| Savings from limited network plans (D85) | Retaining primary care physician (I11) |
| Limited network plans with restrictive primary care access (I11) | No cost reductions (D61) |