Cost-shifting in manged care

Area of Science:

• Health Services Research
• Public Health Policy
• Healthcare Economics

Background:

• The Massachusetts Medicaid program transitioned from fee-for-service to managed care for mental health services in fiscal year 1993.
• Understanding the financial impact of such transitions is crucial for public healthcare systems.

Purpose of the Study:

• To estimate the short-term and long-term effects of managed care implementation on total public expenditures for mental health services.
• To investigate potential cost-shifting between public agencies following the managed care transition.

Main Methods:

• Analysis of per-person expenditures before and after the managed care implementation.
• Estimation of expenditures across five specific services paid by three public agencies (Medicaid, Department of Mental Health, managed care vendor).
• Utilized two-part expenditure models to assess cost-shifting and its relation to quality improvements.

Main Results:

• Per-person expenditures decreased by 24% in the first year of managed care, but savings diminished to 5% in the subsequent two years.
• Expenditures decreased for services paid by the managed care vendor, increased for Medicaid, and decreased for the Department of Mental Health, indicating cost-shifting.
• Cost-shifting effects were more pronounced for beneficiaries with the highest expenditure levels.

Conclusions:

• The shift to managed care demonstrated initial cost savings, with diminishing returns over time.
• Evidence suggests cost-shifting occurred between public agencies, potentially linked to quality of care improvements.
• The findings have implications for healthcare policy regarding managed care implementation and inter-agency financial dynamics.