Tag: Heidi Allen

ObamaCare Supporters Are Over-Interpreting Oregon Medicaid Study

Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment.  In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.

Fisman’s interpretation of the results is different from mine in mainly two respects.  First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”

A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money.  Fisman writes:

Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?

That’s not what cost-effectiveness means.  For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.

The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year).  It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program.  Nor does it tell us anything about the costs and benefits of alternative policies.

Just as some opponents of ObamaCare over-interpreted previous Medicaid studies, Fisman and other ObamaCare supporters are over-interpreting the OHIE.

Oregon Health Insurance Experiment: No Vindication of ObamaCare

The Oregon Health Insurance Experiment is the first experiment since the dawn of time that randomly assigns some households to receive health insurance (Medicaid) for purposes of comparing their medical consumption, health outcomes, and financial security to similar households that do not receive Medicaid coverage.  Some of the nation’s top health economists have released the first batch of results from the OHIE.

At National Review (Online), I summarize the OHIE’s first-year results and offer the following analysis:

Supporters of President Obama’s health-care law may tout these benefits, but the OHIE does not provide the vindication they seek. First, despite being eligible for Medicaid, 13 percent of the control group had private health insurance — suggesting that on some dimension, Medicaid’s eligibility rules are already too broad.

Second, the OHIE extended coverage to the most vulnerable population of uninsured Americans, yet the improvements in health and financial security are so far apparently modest. At higher income levels, where individuals have greater baseline access to health insurance and medical care, the benefits of expanding coverage are likely to be smaller and the costs (to the extent that crowd-out is higher at higher income levels) will be greater.

Third, supporters must show not only that expanding coverage improves health but also that it does so at a lower cost to taxpayers than alternative policies. Health economists generally agree that discrete programs promoting highly effective treatments (for hypertension, diabetes, etc.) could produce health gains as large as expanding health insurance would, but at far less expense. Reducing taxes could plausibly reduce financial strain to a similar degree by expanding job creation.

Finally, the OHIE illuminates an unflattering feature of the push for Obamacare. For a century, the Left has advocated universal health insurance despite not knowing what benefits it might bring. In 2010, Congress and President Obama vastly expanded Medicaid without waiting for the results of the one study that might tell them what taxpayers would get in return for their half a trillion dollars. As the law’s supporters seek to cajole doctors into practicing evidence-based medicine, it is no small irony that they themselves dove head-first into evidence-free policymaking.

To the Church of Universal Coverage, the benefits of universal coverage, whatever those might be, are an article of faith.