Medicaid's Role in the Many Markets for Health Care

To illuminate Medicaid's growing role as a health care purchaser, we estimated Medicaid spending and market shares for 30 markets defined by provider category of service. For approximately 15 markets, our estimates are more detailed than the data available from standard sources. Two-thirds of Medicaid spending occurs in markets where the program has a modest market share. The other one-third occurs in markets that Medicaid dominates, especially in the areas of long-term care (LTC), mental retardation, and mental health. We explore the implications of the different roles for payment policy, industry organization, data availability, and quality of care.