Nonprice competition and quality of care in managed care: the New York SCHIP market

Abstract

Objective: To examine the effect of nonprice competition among managed care plans on the quality of care in the New York SCHIP market.

Data sources: U.S. Census 2000; 2002 New York State Managed Care Plan Performance Report; and 2001 New York State Managed Care Annual Enrollment Report.

Study design: Each market is defined as a county, and competition is measured as the number of plans in a market. Quality of care is measured in percentages using three Consumer Assessment of Health Plans Survey and three Health Plan Employer Data and Information Set scores. Two-stage least squares is applied to address the endogeneity between competition and the quality of care, using population as an instrument.

Principal findings: We find a negative association between competition and quality of care. An additional managed care plan is significantly associated with a decrease of 0.40-2.31 percentage points in four out of six quality measures. After adjusting for production cost, a positive correlation is observed between price and quality measures across different pricing regions.

Conclusions: It seems likely that pricing policy is a constraint on quality production, although it may not be interpreted as a causal relationship and further study is needed.

Figure 1

Price Control and Quality of Care.