The Agenda

Annie Lowrey on the Oregon Health Study

During the debate over coverage expansion, many critics of the president’s broad approach argued that the Obama administration and its congressional allies had underestimated its potential cost. Annie Lowrey, an economics correspondent for the New York Times, draws on new research on a state-based coverage expansion effort in Oregon that seems to strengthen this critique:   

In a continuing study, an all-star group of researchers following Ms. Parris and tens of thousands of other Oregonians has found that gaining insurance makes people healthier, happier and more financially stable. The insured also spend more on health care, dashing some hopes of preventive-medicine advocates who have argued that coverage can save money — by keeping people out of emergency rooms, for instance. In Oregon, the newly insured spent an average of $778 a year, or 25 percent, more on health care than those who did not win insurance. For the nation, the lesson appears to be a mixed one. Expanded coverage brings large benefits to many people, but it is also more likely to increase a stretched federal government’s long-term budget responsibilities.

Because the Oregon Health Study assigned coverage randomly, it gave researchers a valuable window into the impact of coverage expansion.

“The study put to rest two incorrect arguments that persisted because of an absence of evidence,” said Katherine Baicker, a Harvard economist who worked on the study and served as an economic adviser to President George W. Bush.

“The first is that Medicaid doesn’t do anything for people, because it’s bad insurance or because the uninsured have other ways of getting care,” Ms. Baicker said. “The second is that Medicaid coverage saves money” by increasing preventive care, for instance.

“It’s up to society to determine whether it’s worth the cost,” she added.

Lowrey spoke with several of the participants in the study, many of whom believe that gaining access to subsidized coverage greatly improved their quality of life. She also notes the following:

Many described poverty and its attending problems, not health care, as their major challenge.

This leads me to the most salient question: given the cost of the intervention, was it the best way to yield a positive result? That is, might there be some other poverty-alleviating measure that would do just as much to make people “healthier, happier, and more financially stable” yet that would cost somewhat less? Or might we have spent the same amount and yield an even greater increase in health, happiness, and financial stability? This is an extremely difficult question to answer, yet it seems like an important one to answer. I often get the impression that the totemic significance of coverage expansion distracts us from larger questions of how to better the lives of the least well-off.

For example, it would be interesting to see if direct cash transfers would yield more happiness, as people disinclined to spend on medical care might instead invest in their human capital or increase their non-medical consumption. Or perhaps we’re faced with a hyperbolic discounting problem in which people systematically underestimate how much they should spend on medical care, thus justifying coverage expansion on grounds of paternalism.  


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