Nonprice Competition and Quality of Care in Managed Care

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. PRINCIPLE FINDINGS: The authors 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.