The Value of Medicaid

Medicaid is the largest means-tested program in the U.S., with expenditures of over $425 billion in 2011. The Oregon Health Insurance Experiment, a recent expansion of the Medicaid program in that state that occurred by random assignment, has provided some of the most compelling evidence to date on the program’s effects. A series of previous studies analyzing this experiment has found that Medicaid coverage: increases health care use; improves self-reported health and mental health while having no effect on mortality or physical health; reduces the risk of large out-of-pocket medical expenditures; and has no significant effect on employment, earnings, or private health insurance coverage (for more details, see http://www.nber.org/oregon/).

Despite this recent work, however, it has not been clear how to assess the value of the Medicaid program. How do the welfare benefits of the program compare to its costs? How do the program’s benefits compare to the benefits of other cash-based transfer programs?

– The National Bureau of Economic Research

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