There are a number of studies that cast a surprising amount of doubt on the effectiveness of Medicaid in improving health and reducing mortality. Although those results should cause some soul-searching on the part of supporters of Obamacare (which will expand Medicaid to reduce the number of uninsured), they are not definitive by any means, in part because it’s normally very hard to do clinical trial-style tests on health insurance programs.
The state of Oregon, however, recently performed something like a natural experiment that provided researchers with chance to see whether Medicaid causes better outcomes among enrollees. Oregon increased Medicaid by holding a lottery for people who wanted to sign up, leading to people being randomly assigned to two groups: the people who won the lottery and enrolled in Medicaid, and those who lost the lottery and didn’t get Medicaid. In other words, the lottery effectively created a treatment group and a control group, allowing for a more rigorous test.
A year into the program, a number of prominent health researchers have studied the results. Much of what they found reflects well on Medicaid: those on Medicaid received more care, reported better health, and faced fewer financial hardships than those without.
Yet in other ways, the study’s conclusions for other key outcomes were still inconclusive. As Megan McArdle notes, one thing the study doesn’t show is that Medicaid saves lives:
This is exactly what the study does not find. Indeed, it pretty much confirms what has come to be my view of the evidence on the impact of insurance: you see a very clear impact on utilization, including a handful of recommended preventative screenings, as well as hospitalizations and other treatments. You see a moderately strong effect on both patient and provider finances: fewer medical bills sent to collections, and lower self-reported financial strain from medical costs. And people like being insured, so various self-reported measures rise. The rest is more ambiguous.
For example, the strongest impact on health that they find is that self-reported health status rises by a modest-but-still-significant 0.2 standard deviations: reported depression goes down, while the people who won the lottery were more likely to say that they were in good, very good, or excellent health. This rules out the theory that people who have more contact with the health system might feel less healthy because their doctor gives them more things to be paranoid about, but as Finkelstein et. al note, it doesn’t quite show that they’re actually healthier. Indeed, about 2/3 of the improvement in self-reported physical health comes almost immediately, before people had a chance to consume much in the way of health services; this suggests that the effect may be psychological rather than the result of any improvement in their physical well being. As the authors say “Overall, the evidence suggests that people feel better off due to insurance, but with the current data it is difficult to determine the fundamental drivers of this improvement.”
And Michael F. Cannon argues that the new Oregon study doesn’t even begin to address the big questions about Medicaid’s worth:
The [Oregon Health Insurance Experiment] establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year). It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program. Nor does it tell us anything about the costs and benefits of alternative policies.
In other words, this new study is a valuable addition to the collected evidence on Medicaid. That collected evidence still leaves a lot of doubt about the effectiveness of Medicaid in accomplishing its intended goals, and even more doubt about its cost effectiveness.