It’s Easy for Obamacare Critics to Overlook the Merits of Medicaid Expansion

The following originally appeared on The Upshot (copyright 2016, The New York Times Company)

Three years into Obamacare and it seems as if much of the news is bad: private insurers exiting the exchanges, networks being narrowed, premiums rising and competition dwindling out of existence.

But it’s important to remember that many, if not most, of the newly covered Americans became insured through an expansion of Medicaid. Here, too, you hear a lot of bad news: that Medicaid offers poor quality and little choice of providers, that it is expensive for the states to administer and that its growing cost will eventually bankrupt states. As of today, 19 states have still refused to participate in the expansion.

Such declarations consider only one side of the equation, though. In most ways, Medicaid offers an excellent return on investment.

A rigorous analysis of the health benefits of being insured shows that Medicaid works on a number of levels. Critics of the program will point to studies that show that having Medicaid is associated with poor outcomes, even worse than those for the uninsured. Such studies are often flawed, however, in that those on Medicaid are often poorer and sicker than those who are uninsured.

Some good randomized trials do exist. The Oregon Health Insurance Experiment is one of the most recent and best known. Many news articles have been written on the short-term findings of that study, which have been interpreted in many ways, both good and bad. But even that study couldn’t answer many of the long-term, holistic questions about its effects on health.

To see the longer-term benefits across a wider population, we need to turn to other types of studies. They exist as well, usually taking advantage of changes in policy. Medicaid coverage of children and births expanded rapidly from the late 1970s through the early 1990s. When expectant mothers got early prenatal coverage, babies were less likely to be obese when they grew up. They had fewer hospitalizations, especially preventable hospitalizations, for any number of chronic disorders.

Another study from last fall went further. By exploiting new Medicaid eligibility policies, researchers were able to closely compare people with and without benefits. They found that African-Americans who had more years of Medicaid eligibility as children had fewer hospitalizations and emergency department room visits as adults. More years of coverage achieved better results, even with respect to mortality.

Benefits from Medicaid extend beyond health. A 2016 National Bureau of Economic Research working paper examined the effect of the Medicaid expansion on financial outcomes of beneficiaries. Using credit report data, researchers showed that the expansion was associated with a reduction of collection balances of as much as $1,000 for those receiving Medicaid.

The financial benefits extend to society. A study from early 2015 looked at how expanding coverage to children in the 1980s and 1990s affected long-term finances. The analysis showed that children whose eligibility increased were more likely to go to college, earn higher wages and pay more taxes by the time they were 28 years old.

In fact, after accounting for other factors, the researchers estimated that the government would recoup 56 cents on each dollar spent on childhood Medicaid by the time beneficiaries reached age 60. Other studies confirm that Medicaid in childhood makes children more likely to finish high school and college.

At a national level, the expansion of Medicaid continues to yield benefits. Its coverage was increased, and its quality raised. Some states that have expanded Medicaid are even expecting net savings for the next few years. In states where Medicaid was expanded, hospitals had fewer uninsured visits.

Focusing on only the positives can be as misleading as focusing on only the negatives. Policy decisions, including those involving health, need to be considered in terms of trade-offs. It is true that providing Medicaid can cost the federal government, and even states, a lot of money, which can’t then be spent on other worthy pursuits. It is true that Medicaid reimburses physicians and hospitals less generously, and that it often leaves beneficiaries with fewer choices than private insurance might.

But when we look at the balance sheet for Medicaid — health benefits, financial security, societal improvements through education — it’s not hard to argue that money allocated to Medicaid is well spent.


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