Volume 51, Issue 1 p. 59-108
Original Article

The impact of the managed care backlash on health care spending

Maxim L. Pinkovskiy

Corresponding Author

Maxim L. Pinkovskiy

Federal Reserve Bank of New York

maxim.pinkovskiy@ny.frb.org.Search for more papers by this author
First published: 20 March 2020
Citations: 4

This paper was written as the first chapter of the author's Ph.D. dissertation at the Massachusetts Institute of Technology. I am immensely grateful to Daron Acemoglu, Amy Finkelstein, and Jerry Hausman for guidance and advice. I am very grateful to David Autor, Manasi Deshpande, Nicole Gorton, Tal Gross, Jonathan Gruber, Andrew Haughwout, Katherine Ho, Horacio Larreguy, Claire Lim, William Nober, Matthew Notowidigdo, Benjamin Olken, Christopher Palmer, James Poterba, Adam Sacarny, Joe Shapiro, James Snyder, Heidi Williams, seminar participants at MIT, the American Enterprise Institute, the Bureau of Economic Analysis, Mathematica, and the Federal Reserve Bank of New York, and conference participants at the 2014 System Applied Microeconomics Conference (Minneapolis, MN), 2017 Society for Econometric Measurement Conference (Cambridge, MA), and 2018 National Tax Association Annual Conference (New Orleans, LA) for extremely valuable feedback, comments, and suggestions. I am very grateful to Jean Roth, Mohan Ramanujan and the NBER for helping me with access to data from the AHA Annual Survey. I am very grateful to Chad Syverson and two anonymous referees for very thoughtful comments. I am deeply indebted to Laurence Baker for sharing with me his county-level HMO penetration measure and to Susan Laudicina for sending me her publication, “State Legislative Health Care and Insurance Issues.” Finally, I am very grateful to the Paul and Daisy Soros Fellowship for intellectual stimulation, and to the National Science Foundation Graduate Research Fellowship Program (NSF GRFP) and to the Humane Studies Fellowship (Institute for Humane Studies) for graduate study funding.

Abstract

The health spending slowdown associated with the managed care revolution in the 1990s suggests that managed care may have been successful in controlling health care spending. I exploit the passage of state regulation during the “managed care backlash” as well as geographic variation in managed care intensity to measure the impact of managed care on spending. I find that restricting managed care causes a large and significant increase in hospital spending, which cannot be explained by changes in hospital market concentration, other regulatory activity, and multiple other possible explanations. I also do not find effects of the backlash on mortality.

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