Evaluating Accountable Care Organizations is difficult because there is a great deal of heterogeneity in terms of their reimbursement incentives and other programmatic features. We examine how variation in reimbursement incentives and administration among two Medicaid managed care plans impacts utilization and spending. We use a quasi-experimental approach exploiting the timing and county-specific implementation of Medicaid managed care mandates in two contiguous regions of Kentucky. We find large differences in the relative success of each plan in reducing utilization and spending that are likely driven by important differences in plan design. The plan that capitated primary care physicians and contracted out many administrative responsibilities to an experienced managed care organization achieved significant reductions in outpatient and professional utilization. The plan that opted for a fee-for-service reimbursement scheme with a group withhold and handled administration internally saw a much more modest reduction in outpatient utilization and an increase in professional utilization.

Original languageEnglish
Pages (from-to)47-68
Number of pages22
JournalJournal of Health Economics
Issue number1
StatePublished - Jul 2014

Bibliographical note

Funding Information:
We would like to thank Tania Barham, Glenn Blomquist, J.S. Butler, Julia Costich, Janet Currie, Al Headen, Lorens Helmchen, Inas Rashad Kelly, Carlos Lamarche, Adriana Lleras-Muney, Jim Ziliak, participants at the 2008 ASHE conference, the 2008 AHEC conference, the 2010 SHESG conference, the 2010 EEA meetings, seminar participants at the University of Kentucky, Emory University, Western Kentucky University, and Georgia State University, the staff at the Kentucky Cabinet for Health and Family Services, and two anonymous referees for their valuable comments. We would also like to thank Gao Liu, Erin Coffman, T.J. Christian, Jamie Turner, and Subha Basu for their work as research assistants. Any errors are, of course, our own. This project was supported with a grant from the UK Center for Poverty Research through the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, grant number 5 ASPE417-03 as well as a Georgia State University Faculty Research Initiation Grant. The opinions and conclusions expressed herein are solely those of the authors and should not be construed as representing the opinions or policy of the UKCPR or any agency of the Federal government.


  • Child health
  • Managed care
  • Medicaid

ASJC Scopus subject areas

  • Health Policy
  • Public Health, Environmental and Occupational Health


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