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Critical Condition

NRO’s health-care blog.

Obamacare Supporters Are Over-Interpreting Oregon Medicaid Study



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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.



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