Journal of Regulatory Economics

, Volume 50, Issue 3, pp 251–270 | Cite as

A Leak in the Lifeboat: The effect of Medicaid managed care on the vitality of safety-net hospitals

  • Lindsey Woodworth
Original Article


States are increasingly adopting Medicaid managed care in efforts to address budgetary concerns. The intent is that by releasing Medicaid oversight to private organizations, competition will drive down healthcare expenditures so that savings may be passed to the state. Yet there are concerns that this competitive solution to cost savings might compromise safety-net hospitals. Managed care organizations cut costs by restricting the providers that enrollees are allowed to see. If movement in Medicaid patients disrupts safety-net hospitals’ casemix, this could affect their ability to cross-subsidize care. This study estimates the impact of Medicaid managed care on safety-net hospitals by exploiting a Florida pilot program that required Medicaid recipients in five counties to enroll in managed care. The results suggest this mandate led to a small reduction in safety-net hospitals’ average ratio of payment-to-cost. There is also some evidence that the effect on safety-net hospitals was disproportionate. This disproportionality was such that hospitals nearest the margin were pushed the furthest towards the edge.


Managed care Medicaid Safety-net hospitals 

JEL Classification

H7 I1 


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of South CarolinaColumbiaUSA

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