Gruber & Simon: Crowd-out Is Clearly Significant

Have you checked your inbox for this week’s summary of the latest working papers from the National Bureau of Economic Research? 

If not, you might have missed the latest from Jonathan Gruber and Kosali Simon about how expanding government health programs reduces private health insurance coverage. Here’s the abstract:

The continued interest in public insurance expansions as a means of covering the uninsured highlights the importance of estimates of “crowd-out,” or the extent to which such expansions reduce private insurance coverage. Ten years ago, Cutler and Gruber (1996) suggested that such crowd-out might be quite large, but much subsequent research has questioned this conclusion. We revisit this issue by using improved data and incorporating the research approaches that have led to varying estimates. We focus in particular on the public insurance expansions of the 1996–2002 period. Our results clearly show that crowd-out is significant; the central tendency in our results is a crowd-out rate of about 60%…. We also find that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance.

In other words, for every 10 people added to the Medicaid rolls, the number of people with private health insurance falls by six.

And just in time for the debate over SCHIP reauthorization.