Effects of Involuntary Plan Switching on Outpatient and Emergency Department Visits: Evidence from Medicaid Managed Care Plan Exits

Background: By 2017, managed care penetration reached 81% in Medicaid, 33% in Medicare, and almost all of group and individual markets. Due to the large number of individuals affected, there is growing concern about the instability of managed care markets. One particular aspect of market instability – plan exits – presents a potentially significant challenge to the continuity of care for affected enrollees, because their new plans may include different provider networks or services from the exited plan. However, the effects of these plan exits are unclear. Exploiting the natural experiments created when 12 Medicaid managed care plans exited the Medicaid markets across 4 states between 2007 and 2012, we examined the effects of involuntary plan switching due to plan exits on overall outpatient, new outpatient, and ED visit rates among Medicaid managed care enrollees.

Methods: We identified 12 exited and 41 control MMC plans in CA, FL, NJ, and NY between 2007 and 2012. Using the Medicaid Analytic eXtract, the national claims database for Medicaid, our study included 1,303,772 Medicaid enrollees aged 19-64 years, of whom 67,417, or 5.2%, experienced a plan exit during the study period. The unit of analysis was person-month. For each outcome, we estimated treatment effects using a linear model with a difference-in-difference (DID) framework to compare outcomes between enrollees in plans that exited and enrollees in control plans, 12 months before and 12 months after plan exits. A binary variable indicated whether a plan exited or was a control plan. A binary post-policy variable indicated whether an observation was in the pre- or post-exit period. The variable of interest was the interaction term between the exit and post-policy indicators. All models were adjusted for month, state, Medicaid service area, and treatment-control pair fixed effects. Each treatment-control pair consists of enrollees in a plan that exited and enrollees in control plans within the same Medicaid service area. Standard errors were corrected for heteroscedasticity by clustering at the plan level. We also examined the heterogeneous effects of plan exits, if any, across states.

Results: Among enrollees who experienced a plan exit, new outpatient utilization increased from 2.2 visits per 100 enrollees per month before plan exits to 3.2 after, compared to from 2.4 to 2.6 among control enrollees who did not experience an exit. The adjusted DID was 1.05 (p-value: 0.004), or a 43.8% relative increase. Overall outpatient and ED visit rates were unchanged. However, these effects varied widely across states. For new outpatient visits, the adjusted changes ranged from insignificant in CA and NY to a 52.8% increase in FL (p-value: <0.001) and 40.7% in NJ (p-value: 0.001). ED visit rates increased in two states, by 14.4% (p-value: 0.03) in CA and 14.0% (p-value: 0.05) in FL. A 18.7% decrease (p-value: 0.05) in overall outpatient visits was observed only in CA.

Conclusion: Plan exits may disrupt continuity of care for affected enrollees, and these effects vary across managed care markets. Policymakers and clinicians should consider potential adverse consequences when managed care plans leave Medicaid.