Medicaid Managed Care: Mixed Evidence and the “Procured Competition” Model

A new working paper by Mark Shepard and Jacob Wallace examines how Medicaid Managed Care operates in the United States, focusing on the “procured competition” model used in one of the country’s largest public health programs, Medicaid. Medicaid provides health insurance to more than 75 million low-income Americans, and over three-quarters of beneficiaries receive care through privately run managed care insurers.

The authors highlight three main findings. First, existing evidence on Medicaid privatization is mixed. While the system relies heavily on private insurers to deliver care, there is little consistent proof that outsourcing has significantly reduced government spending or improved overall quality of care. This challenges assumptions that private-sector involvement automatically leads to better efficiency or outcomes.

Second, the paper introduces the concept of “procured competition” to describe Medicaid Managed Care. This framework combines elements of public procurement—where governments contract services—with regulated competition among private insurers. States design contracts, set rules, and choose insurers, while companies compete for enrollment and funding.

Third, the authors discuss policy tools that shape outcomes, including procurement strategies, market competition design, and consumer choice mechanisms. They emphasize that U.S. states use widely different approaches, creating natural variation that could help researchers better understand what works.

Overall, the paper argues that Medicaid Managed Care remains an under-researched system with major opportunities for future policy and health economics studies.

Shepard, M., & Wallace, J. (2026). Understanding Medicaid managed care: The procured competition model (NBER Working Paper No. 35146). National Bureau of Economic Research. https://doi.org/10.3386/w35146