Next up in my “Medicaid-IV” series–in which I’m reviewing papers that use instrumental variables techniques to estimate the effects of Medicaid on health outcomes–is the widely-cited 1996 Quarterly Journal of Economics paper by Currie and Gruber on Medicaid and child health (link to ungated version).
Not surprisingly, the authors do a superb job of explaining their approach and interpreting their results. So, I’m going to liberally quote from the paper. Let’s start with the abstract just to get an overview, then I’ll hit some important issues not fully revealed by such a brief summary.
We study the effect of public insurance for children on their utilization of medical care and health outcomes by exploiting recent expansions of the Medicaid program to low-income children. These expansions doubled the fraction of children eligible for Medicaid between 1984 and 1992. … [E]ligibility for Medicaid significantly increased the utilization of medical care, particularly care delivered in physicians’ offices. Increased eligibility was also associated with a sizable and significant reduction in child mortality.
By “exploiting recent expansions of the Medicaid program” the authors mean they use state-year variations in those expansions to construct an instrument that is not correlated with individual characteristics but is correlated with Medicaid eligibility, and therefore with Medicaid enrollment. The instrument and how it works are mind-benders (I didn’t get it upon first encounter). It’s the average Medicaid eligibility rate under each of the year-state Medicaid rules where the average is computed over a year-but-not-state-varying population of kids. (I know that’s hard to grok. I could spend a whole post explaining it further, but I won’t. You’ll have to trust me that it is a valid instrument and has become standard technique for instrumenting for Medicaid status. Or you can read the paper. This is advanced material!)
A good question is, “Why the focus on kids?” Currie and Gruber have a great answer:
A potential problem with utilization measures, however, is that they confound access and morbidity. For example, the Medicaid expansions may have increased access to hospitals, but at the same time they could have increased the use of preventive care, improving health status and reducing the demand for hospital care. One way to surmount this problem is to focus on utilization that is explicitly preventative, and therefore unaffected by morbidity. Pediatric guidelines recommend at least one doctor’s visit per year for most children in our sample, so that the absence of a doctor’s visit in the previous year is suggestive of a true access problem, regardless of underlying morbidity.
The results are well-summarized by the abstract quoted above, but I want to highlight a few things. The authors find that Medicaid eligibility cuts the probability in half that a child will go a year without seeing a physician in any setting. Much of this is due to increased visits to doctors’ offices. They also find that the 15.1 percentage point rise in Medicaid eligibility during the study period reduced child mortality by 5.1 percent. Their sub-analysis of mortality is sharp:
If Medicaid eligibility reduces deaths by improving the utilization of care, then we would expect deaths due to “internal causes” (such as disease) to fall more than deaths due to “external causes” (such as accidents, homicides, suicides, and other external causes). [The results] show that this is indeed the case: increases in eligibility are correlated with a significant reduction in deaths due to internal causes, but have no significant effect on deaths due to external causes.
I’ve saved the most puzzling finding for last, Medicaid eligibility was found to increase hospital visits. That sounds bad, and maybe it is. But the mechanism could be benign, as the authors explain.
[H]ospitals may be better equipped to assist patients in claiming benefits. Potential eligibles for Medicaid must complete lengthy and complex application forms, provide extensive documentation (such as birth certificates, pay stubs, and confirmation of child care costs), and attend several interviews with caseworkers. … In response, many hospitals have established special offices, or contract with private companies, to assist Medicaid eligibles in completing these procedures. … The nontrivial costs of providing these services may be beyond the means of private doctors and clinics, leading them to recommend that potential eligibles seek care in a hospital setting.
Before closing, it is worth noting two things. One, the control variables in the regressions do not include health status. That’s important since health status could be an outcome of Medicaid enrollment. (Inclusion of an outcome as a control variable leads to bias.) Second, as the authors point out, Medicaid expansions have two effects. They encourage additional Medicaid enrollment and discourage private coverage. Some new Medicaid enrollees had been privately insured, am effect known as “crowding out.” The estimates include all effects of Medicaid expansion on outcomes, including that due to crowding out, but do not distinguish among them.
Finally, there is a question of generality of the findings. This is a study of Medicaid expansions that targeted children about 20 years ago. The ACA’s Medicaid expansion is far broader and occurring in four years from now. Can one generalize the findings of Currie and Gruber to other populations and eras? It’s hard to say. The authors published another paper that used the same techniques and focussed on the effect of Medicaid expansions for pregnant women, finding they lowered infant mortality and increased birth weight. So, the positive effects of Medicaid expansions on outcomes apply to more than one population, which strengthens claims of generality.