Research

How should payers balance fiscal sustainability with access to transformative medical technology? We study Louisiana’s 2019 Medicaid subscription model for hepatitis C (HCV), the first example of a U.S. state employing a two-part tariff to secure unlimited access to curative medicines. Using a differences-in-differences design comparing spending on beneficiaries with HCV to those with diabetes or HIV, we find that treatment volume tripled, medical spending fell, and new HCV diagnoses declined 23 percent. The state’s $37 million in incremental spending on antivirals generated $266 million in five-year savings. Innovative financing models can generate health benefits and near-term savings for payers.

This paper examines the effects of privatizing social health insurance. We exploit a natural experiment in Medicaid, wherein nearly 100,000 enrollees were randomly assigned between a publicly operated fee-for-service system and private managed care. Managed care reduced costs by 5.6 percent via cost-effective substitutions among prescription drugs and via lower prices for outpatient services. We present evidence that pharmacy utilization management was the key mechanism reducing overuse and encouraging substitution to lower-cost drugs without decreasing observed quality. In contrast, privatizing medical benefits led to only modest savings and was associated with decreased health care quality and consumer satisfaction.