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Medicaid’s impact, finally measured

Unique study shows the effects of health insurance program: More treatment and fewer financial shocks for the poor, more bills paid for hospitals and doctors.

Enrolling in Medicaid significantly improves the overall health and financial stability of low-income Americans, according to a new study co-authored by MIT researchers who’ve used a unique program in Oregon to shine a light on the effects of public health insurance.

The research shows that Medicaid recipients are far more likely to receive health care than the uninsured. Citizens with Medicaid are 30 percent more likely to have a hospital stay, 35 percent more likely to have an outpatient visit to a doctor, and 15 percent more likely to take prescription drugs, compared to similar low-income citizens not enrolled in the program.

“There has been a lot of genuine uncertainty about whether it makes a difference when you give people Medicaid,” says Amy Finkelstein, a professor in MIT’s Department of Economics and one of the principal investigators of the study. “The short answer from our study is that it does.”

People enrolled in Medicaid also see improvements in their finances: They are 35 percent less likely to experience out-of-pocket medical expenses, and see a 25 percent decline in unpaid medical bills sent to collection agencies. The program also reduces the number of unpaid bills owed to health care providers.

The results are detailed in a new working paper, “The Oregon Health Insurance Experiment: Evidence from the First Year,” released today (July 7) by the National Bureau of Economic Research (NBER). Finkelstein and Katherine Baicker, a professor at the Harvard School of Public Health, served as principal investigators on the study.

Lucky lottery numbers

The study takes advantage of a novel program in Oregon, where officials determined they could support Medicaid for about 10,000 additional residents starting in 2008. To fill those new slots, the state instituted a lottery system to which roughly 90,000 people applied.

Medicaid is the joint federal-state program that provides health insurance specifically for low-income U.S. citizens; it was created in 1965 along with Medicare, the federal health insurance program designed largely for senior citizens. States have some discretion in setting eligibility for the program; in Oregon, adults below the federal poverty level (annual income below $10,400 for a single person or $21,200 for a family of four) are eligible for Medicaid.

Because Oregon instituted a random lottery to allocate the limited number of additional slots available, the researchers could study the effects of health insurance without distortion from the differences in health and income that ordinarily plague comparisons of the insured and uninsured: In this case, those groups were the same except for the luck of the draw.

“If you just compare low-income insured people and uninsured people … it can look like health insurance actually is bad for your health,” Finkelstein observes. “But that’s because people in worse health are more likely to seek out health insurance, not because health insurance makes you sicker.” This study, she says, replicates the randomized controlled design used in scientific laboratory studies but rarely available in the social sciences.

By comparing the insured and uninsured over a 16-month span, the researchers found that people enrolled in Medicaid are less burdened by medical expenses. “People report reduced out-of-pocket medical expenses,” Finkelstein says. Indeed, the study shows that Medicaid recipients are 40 percent less likely to need to borrow money — or ignore other bills — in order to pay medical expenses.

Medicaid recipients even reported a 32 percent increase in their overall happiness level, although, as the authors note, it is not precisely clear how much of this stems from improved physical health, the added financial security of having health insurance, or overall improvements in well-being.

The Oregon results also demonstrate something of value to health care providers: a decline in outstanding medical bills. “Since most bills that aren’t paid [on time] end up never being paid,” Finkelstein explains, “this actually suggests that some of the beneficiaries from an expansion of Medicaid are health care providers like hospitals and doctors.” Medicaid beneficiaries tend to owe about $390 less in unpaid medical bills than similar individuals without insurance.

‘A landmark study’

Other economists believe the result is highly significant. “This is a landmark study that for the first time provides a reliable measure of how health insurance affects health care and well-being,” says Jonathan Skinner, a professor of economics at Dartmouth College. Skinner adds that the study “is also important because it speaks to the potential bonus arising from an expansion of health insurance coverage in the U.S. It seems pretty clear that newly enrolled households are happier once they get health insurance.”

Finkelstein and Baicker gained permission from Oregon officials to conduct the study and worked with a group of researchers in Oregon and on the East Coast. The team surveyed Medicaid recipients and stitched together data from sources as diverse as mortality reports and credit scores to build a picture of Medicaid’s medical and financial effects.

The researchers are working to expand their current study to include more information that can further detail Medicaid’s effects, including gathering emergency-room data and physiological test results over an extended period of time.

Along with Finkelstein and Baicker, co-authors on the current working paper are Heidi Allen of the Oregon Health Study; Mira Bernstein of the NBER; Jonathan Gruber, a professor in MIT’s Department of Economics; Joseph P. Newhouse, a professor at Harvard Medical School; Sarah Taubman of the NBER; and Bill Wright of the Oregon Health Study.

Funding for the study came from the National Institute on Aging; the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services; the California HealthCare Foundation; the Centers for Medicare & Medicaid Services; the John D. and Catherine T. MacArthur Foundation; the Robert Wood Johnson Foundation; the Sloan Foundation; the Smith Richardson Foundation; and the U.S. Social Security Administration.

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