June 24, 2015


What if health insurance doesn't make you much healthier? (Ezra Klein, June 22, 2015, Vox)

Is Medicaid a bad idea?

That's what Tyler Cowen asks after reading a working paper from economists Amy Finkelstein, Nathaniel Hendren, and Erzo Luttmer. The paper is highly technical, but its headline finding is that a dollar in Medicaid spending doesn't lead to anything near a dollar in value for Medicaid beneficiaries.

It finds this two ways. First, if you test whether Medicaid users would pay the price of their Medicaid coverage if the government took it away, they say no. This makes some sense, as they are very poor, and one reason they have Medicaid is they don't have the money to buy insurance on their own.

The more interesting finding is the second one: if you look at where Medicaid's money goes, less of it than you might think goes to covering the uninsured -- and more goes to paying back the people who are already covering the uninsured. [...]

There's one fact that drives pretty much every other finding in Finkelstein's new paper: the poor and uninsured only pay about 20 percent of the cost of their medical care.

Who pays the rest? Finkelstein and her co-authors don't know. There's good evidence that a lot of it is borne by hospitals, who in turn pass it on to the government, the insured, and so on. But it's also likely that some of these costs are being borne by churches, charities, family members, etc.

Whoever is paying these bills, the result is that a lot of Medicaid spending ends up offsetting this pre-Medicaid spending. "We estimate that a substantial portion of the government's Medicaid spending -- $0.6 on the dollar -- represents a transfer to the providers of this implicit insurance," the researchers write.

Universal health insurance is about people not having to ask for free health care.  It won't improve their health.

Posted by at June 24, 2015 5:40 PM

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