Choice in Public Health Insurance: Evidence from West Virginia Medicaid Redesign

Posted: 7 Jul 2011

Date Written: June 2010

Abstract

Personal choice is often mentioned as a goal in the debate over health reform. However, there is little evidence to evaluate how choice affects goals such as increasing access to health care, reducing costs, and improving health. This research examines behavioral responses to a recent Medicaid reform where participants were able to choose between plans with different service levels. We examine the degree of adverse selection in plan selection, creating a foundation for understanding the fiscal and health effects of the reform.The State of West Virginia recently redesigned their Medicaid program, providing beneficiaries with a choice between a Basic Plan and an Enhanced Plan. The latter plan offers more benefits but requires additional agreements between the patient and the State as well as a visit to the doctor. These contracts were designed to encourage patients to use the health care system more effectively by creating a program that was tailored to the individual. Elements of the reform address preventative care, chronic disease management, and the adoption of healthier lifestyles. As of July 2009, almost 14 percent of eligible members were enrolled in the Enhanced Plan.Implicit in this design was the idea that beneficiaries would select the plan most advantageous to their situation. However, the reforms were surrounded by debate as to which factors would motivate self-selection into the two plans. For instance, some suggested that the healthiest individuals would choose the Enhanced Plan. These individuals would face the lower costs to signing the agreements as they would already be abiding by the stipulations and might be the most motivated to utilize resources for better nutrition, weight management, and smoking cessation. Alternatively, some suggested that beneficiaries would self-select into their respective plans on the basis of past health care utilization and those with relatively high demand for services would select the Enhanced Plan.To examine which factors drive enrollment into the two different plans, we utilize a four year panel of the population of administrative enrollment and health claims data (doctor visits and prescriptions) from the West Virginia Department of Health and Human Resources, Bureau for Medical Services. Our analysis uses the within-person variation in eligibility and the staggered implementation of the reform to address issues of selection bias. Further, to gain a better understanding of additional factors that may drive plan choice, we link this panel with survey data that includes a rich cross-section of physiological, psychological, and demographic attributes from a stratified random sample of Medicaid.Preliminary results suggest that individuals self-select into the two different plans on the basis of prior health care utilization. Individuals with the highest utilizations rates, and presumably the most health needs, select into the Enhanced Plan. Further, the influence of information about the plans and barriers to enrollment faced by beneficiaries play a significant role in the plan decision, particularly for the parents/guardians of child members.

Keywords: adverse selection, Choice, health reform, Medicaid, self-selection

Suggested Citation

Gurley-Calvez, Tami, Choice in Public Health Insurance: Evidence from West Virginia Medicaid Redesign (June 2010). Available at SSRN: https://ssrn.com/abstract=1880655

Tami Gurley-Calvez (Contact Author)

University of Kansas Medical Center ( email )

1415
Jayhawk Blvd.
Lawrence, KS 66045
United States

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