Principal investigator: Bruno Benevit
Authors: Amy Finkelstein, Nathaniel Hendren and Erzo FP Luttmer
Original title: The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment
Location of the Intervention: United States
Sample Size: Adult 75000
Sector: Health Insurance
Primary Variable of Interest: Health coverage
Type of Intervention: Eligibility for health insurance coverage
Methodology: OLS
Summary
Analyzing well-being in relation to health programs is a crucial topic within health policy. Therefore, observing beneficiaries' willingness to pay for services is fundamental to evaluating health programs. In this context, this study addressed the relevance of expanding these policies by examining an experiment conducted in the state of Oregon for the expansion of the program. Medicaid intended for low-income adults without insurance. Through various models formulated by the authors, stable estimates were identified in the expected transfers. Medicaid to beneficiaries through various approaches, while estimates of the additional value for risk protection showed greater variability. Furthermore, the research revealed that the majority of the program's expenses are not directly related to operational costs, but rather to the transfer of resources.
- Policy Problem
Several studies in the literature have sought to evaluate the reduced form of the impacts of Medicaid in several aspects relevant to well-being, including the use of healthcare, health itself, and exposure to risks. However, there have been few attempts to estimate the effect on well-being directly, disregarding a relevant value associated with the program. Thus, the assessment of how much beneficiaries would be willing to pay for services and the measurement of possible monetary transfers to beneficiaries end up being neglected.
Given a non-functional market, the empirical analysis of well-being resulting from public health insurance for low-income adults can become challenging since we do not observe the prices of the contracts. This limitation prevents well-being analysis based on estimates of prior willingness to pay, derived from contractual choices, as is common in private health insurance markets, requiring the use of other empirical strategies.
- Policy Implementation Context
O Medicaid It is the largest health insurance program for socioeconomically vulnerable populations in the United States, operating in partnership with all states in the country. In terms of public spending, resources allocated to the program exceeded US$550 billion in 2015. According to TANF (Temporary Assistance for Needy Families, 2016), the Medicaid It has a significantly larger budget than several other programs in the United States, such as the Food Stamp Program – SNAP (US$ 70 billion), the Economically Income Tax Credit – EITC (US$ 70 billion), the Supplemental Security Income – SSI (US$ 60 billion), and cash financial assistance (US$ 30 billion).
Specifically regarding Oregon, the expansion of Medicaid In the state, the program encompassed low-income uninsured adults, meaning all individuals below 100% of the federal poverty line aged 19 to 64 who were not already categorically eligible for the program. The expansion offered comprehensive medical benefits with no cost-sharing for the beneficiary and with zero or low monthly fees.
- Evaluation Details
The Oregon Health Insurance Experiment was conducted in early 2008, followed by the expansion of Medicaid in the state. This expansion involved opening a waiting list, with 30.000 of the 75.000 people on the waiting list who requested to join the program being randomly selected, allowing the identification of a group of treaty and control groups, both adherent (compliers) to the program. Both groups showed a balance between their characteristics. The selected beneficiaries gained access to health service coverage provided by Medicaid with the payment of premiums or shared costs with zero or insignificant prices.
This experiment provided estimates from a randomized evaluation of the effects of coverage on Medicaid in low-income and uninsured adults in the state, providing a variety of potentially relevant information for measuring well-being (Finkelstein, Hendren, and Luttmer, 2019).
The absence of consumer research in the Oregon context was addressed using proxies, such as the difference between average consumption for a low-income population without insurance and the self-reported medical expenses of the study participants, considering a minimum consumption level. Additional analyses considered consumption data from a low-income sample from the Consumer Expenditure Survey.
In the first two years, the main results revealed that the Medicaid The program increased overall utilization of health services, including outpatient visits, preventive care, prescription medications, hospitalizations, and emergency room visits. Furthermore, the program was observed to contribute to improved self-reported health and a reduction in depression. However, there was no statistically significant impact on mortality or measures of physical health. Additionally, the Medicaid It reduced the risk of significant medical expenses for beneficiaries, but did not have an economically or statistically significant impact on employment, earnings, or private health insurance coverage.
- Method
The study employed two main analytical approaches to estimate the beneficiary's willingness to pay for MedicaidBoth approaches were applied to the coverage of Medicaid In the Oregon Health Insurance Experiment, direct data from study participants were used to measure their own medical expenses, healthcare utilization, and overall health. The random selection of the study lottery provided the possibility of estimating causal effects of Medicaid on various health measures. To this end, an individual utility function model was initially established such that it would increase (be positively affected) according to (i) the consumption of non-medical goods and services and (ii) health, where health is affected by the consumption of healthcare.
The first approach, called complete information, required a detailed specification of a normative utility function and estimates of the causal effects of Medicaid The distribution of all elements of this function requires observing all arguments of that function, both with and without insurance. This approach did not require precise modeling of the budget set created by the program, allowing for the incorporation of frictions, such as behavioral biases or information frictions. However, the high demand for information necessitated a comprehensive specification of the impacts of... Medicaid in all elements of the utility function for accurate measurement.
The second approach, called optimization, reduces the implementation requirements considered in the complete information approach by making two new assumptions: Medicaid The program affects individuals exclusively through its impact on their budget constraint, parameterizing this factor, and assuming that individuals had the capacity and information to make decisions in order to optimize their behavior. By specifying the marginal utility function with respect to a single argument, it was possible to assess the marginal impacts of the program on other potential arguments of the utility function. For inferences about non-marginal changes in the budget set, such as covering an uninsured individual with the program, the program could be evaluated. MedicaidAn additional statistical assumption was used to interpolate between local estimates of the marginal impact of the program's generosity.
As parameters for these models, parameters relating to hospital expenditures were estimated, including medical costs (prescription drugs and hospital services), own medical expenses, and the price of own medical expenses. The primary health measure was a conversion of self-rated health into quality-adjusted life years (QALYs), based on existing estimates of QALYs associated with different levels of self-rated health.
Thus, two terms were identified: (i) a resource transfer term perceived by the beneficiary and received by the beneficiary themselves, and (ii) a “pure insurance” term measuring the benefit of a resource reallocation neutral with respect to the budget constraint considering different states of the health parameter. All estimates of the impact of Medicaid These were the effects of local average treatment (LATE) for program adherents who were selected by randomization.
- Main results
The results of the utility function estimates revealed that the gross cost of Medicaid In Oregon, the cost to beneficiaries was $3.600 per year. In practical terms, the program's net cost effect was $1.448, resulting from the sum of the average increase in medical expenses ($879) and the reduction in out-of-pocket medical expenses ($569). These amounts revealed that the cost of out-of-pocket expenses was 0,21, and that approximately 60% of government spending... Medicaid These represent a transfer to third parties. Using the linear approximation optimization approach, a transfer term of US$661 was estimated, varying between a lower limit of US$569 and an upper limit of US$752 when the linear approximation was not considered.
Analyzing the results of the complete information approach, the authors estimated that the beneficiaries of Medicaid They would be indifferent between the benefits of the program and the consumption of US$1.675 in other goods and services, establishing their willingness to pay for the benefits. Additionally, by breaking down this amount between the value spent on consumption and the value associated with health gains, it was identified that only 80% stems from the impact on consumption (US$1.381 compared to US$294 associated with health). Depending on the value of the health-related component in the valuation of... MedicaidThe transfer component represents between one third (US$ 569) and half (US$ 863) of its value under the full information approach.
The values of these estimates varied little when different measures of consumption were considered. Estimates of the sensitivity of the results considering different measures of the parameters revealed that the willingness of beneficiaries to pay for health services varied between $0,5 and $1,2 per dollar of the net cost of these services.
- Lessons in Public Policy
Analyzing the well-being of non-traded goods is fundamental to measuring the effectiveness of a public policy. Such analysis involves difficulties in application, meaning that the benefits of... Medicaid The fact that its beneficiaries are often ignored in academic literature. This article proposes to evaluate, through parameterized models, how the expansion of Medicaid in the state of Oregon for low-income adults without insurance.
The study revealed that the Medicaid It is best understood as having two distinct parts: a subsidized health insurance product for low-income individuals and a transfer to external parties that would otherwise subsidize medical care for uninsured low-income individuals. It has been identified that 40 cents of every dollar of government spending on the Medicaid These figures represented coverage of the costs that these beneficiaries would incur if they were not insured, and the remainder (60 cents) represents a transfer to these external parties. This evidence highlights the importance of future work studying the immediate and final economic impact of these transfers.
References
FINKELSTEIN, A.; HENDREN, N.; LUTTMER, EFP The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment. Journal of Political Economy, v. 127, no. 6, p. 2836–2874, 2019.
US DEPARTMENT OF HEALTH AND HUMAN SERVICES. FY 2015 Federal TANF & state MOE financial data, 2016
