To examine the effect of nonprice competition among managed care plans on the quality of care in the New York SCHIP market.
U.S. Census 2000; 2002 New York State Managed Care Plan Performance Report; and 2001 New York State Managed Care Annual Enrollment Report.
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.
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.
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.