Debating Medicaid

If you want to keep up, here’s Avik Roy responding to Harold Pollack. And here’s Harold Pollack’s reply. I don’t have much more evidence-based to add beyond what I’ve already written and what Pollack contributed.

What’s ironic is that Avik and I actually share a fair bit of common ground in terms of reform. Things I’ve written about Medicare I think should be applied to the entire system (competitive bidding that includes private and public options, income-based and risk-adjusted subsidies, etc.). Moreover, within that framework I do not have a problem with high-deductible health plan options, provided they’re a choice not a requirement.

My main concern in this debate over Medicaid is how policy outcomes are evaluated and how the results of such evaluations are interpreted. To me, this is principally about research design and methodology, not policy. If one thinks that multivariate controls using observable factors are sufficient in health care, one is ignoring an overwhelming body of work that convincingly shows there is selection based on unobservable factors into all types of insurance coverage. Instrumental variables (IV) can address that.

Now, one can always attack IV, though it takes a good story to do so convincingly. (I’ve not seen one yet that deals a substantial blow to the instruments in the studies I reviewed.) However, even if one were to convincingly dismiss an IV approach to evaluation of Medicaid outcomes that does not mean an observables-based study is any good. Recall that the UVa surgical outcomes study that includes quite a large set of controls illustrated that not only Medicaid but also Medicare is associated with worse health outcomes than no insurance at all.

Why is that? One can claim that Medicaid leads to “family breakdown and social disrepair” (though one had better point to quite a pile of scientifically credible literature before I believe that’s the source of the problem with the IV approaches). But where does that leave Medicare? What’s the story there? Why is the UVa study telling us the right causal story in that case? It just doesn’t hang together.

Ultimately, I don’t see why we need to reject the studies that do reveal a credible causal link between Medicaid and improvements in health. They do not, and cannot, tell us that Medicaid is great in all possible ways. It is a program in need of reform. We can agree on that without needing to reject the good work that shows it is not bad for health. As I wrote before, I would worry about claiming that a study like the UVa one is sufficient for causal inference. My concern would be that any reform to Medicaid — even the one advocated by Avik Roy — would yield similar results based on a similar study, and, therefore, one would have to conclude that there is no program for that population that beats no insurance. (The results for Medicare show us that is likely since it does not have an association with the same social dynamics or provider restrictions as Medicaid.)

What will those who interpret such a study’s results causally say then? Actually, under a causal interpretation, the policy implication would be clear. Revoke Medicaid. Revoke Medicare. Replace them with nothing. Save a fortune, and produce better outcomes at the same time. The only problem is, that’s totally wrong because the study is one of associations, not causation, and the findings suffer from some selection bias. Even the authors of the UVa study admit as much. On what grounds could any reader of their paper steadfastly claim otherwise?

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