Public Spillovers from Private Insurance Contracting: Physician Responses to Managed Care

Managed care is rebounding as more emphasis is placed on cost containment. These efforts may benefit consumers but challenge providers; however, empirical evidence on how supply-side managed care influences physicians is incomplete. We leverage a quasi-experiment3 in which a commercial insurer imposed a new contract regime on behavioral health providers in response to recent policy shifts. We demonstrate spillovers in the form of negative effects on local physician supply and positive effects on Medicare and Medicaid participation in areas where the insurer has market power. Commercially insured patients are also not obviously harmed but receive less intense services in some settings. (JEL G22, I11, I13, I18, I38, J22, J44)