Home > Publications . Search All . Browse All . Country . Browse PSC Pubs . PSC Report Series

PSC In The News

RSS Feed icon

Thompson says America must "unchoose" policies that have led to mass incarceration

Axinn says new data on campus rape will "allow students to see for themselves the full extent of this problem"

Frey says white population is growing in Detroit and other large cities


Susan Murphy to speak at U-M kickoff for data science initiative, Oct 6, Rackham

Andrew Goodman-Bacon, former trainee, wins 2015 Nevins Prize for best dissertation in economic history

Deirdre Bloome wins ASA award for work on racial inequality and intergenerational transmission

Bob Willis awarded 2015 Jacob Mincer Award for Lifetime Contributions to the Field of Labor Economics

Next Brown Bag

Monday, Oct 12 at noon, 6050 ISR
Joe Grengs: Policy & planning for transportation equity

Lauren Nicholas photo

Does Managed Care Reduce Federal Spending? Evidence from Medicare

Publication Abstract

Download PDF versionNicholas, Lauren. 2009. "Does Managed Care Reduce Federal Spending? Evidence from Medicare." PSC Research Report No. 09-671. February 2009.

Although Medicare Managed Care (MMC) was introduced as a way to reduce costs, the effect of the program on total Medicare spending is unknown. Current literature has focused on three conflicting sets of findings including spillover effects from managed care which reduce total Medicare spending and positive selection into managed care and overpayments to managed care plans relative to Fee-for-Service (FFS) spending, which increase spending. This research reconciles these results by examining the effects of Medicare managed care penetration on total county-level Medicare spending for elderly beneficiaries from 1999 - 2004. Using an instrumental variables approach, I find that a one percentage point increase in Medicare managed care penetration increases total county Medicare spending by 1.1 percent, $2.6 billion in 2004 dollars. There is no evidence of cost-reducing spillovers from MMC penetration to FFS. Increases in FFS spending likely caused by positive selection into MMC account for 40 percent of the increase in costs, the remainder is built in by federal payment policy to MMC plans.

Country of focus: United States of America.

Browse | Search : All Pubs | Next