Is Medicaid Worth It? A Look into the Benefits and Drawbacks of One of the Most Expensive Health Insurance Programs in America

Over 40 million Americans have filed for unemployment benefits over the course of the Covid-19 pandemic, and the situation only appears to be worsening. Many of these workers are now turning to Medicaid to receive the health insurance coverage that they once received through their employer. Medicaid is a joint federal and state health insurance program that provides coverage to over 64 million low-income Americans. The program has proven to be the center of significant political debate ever since the Affordable Care Act (Obamacare) required states to expand Medicaid coverage, only for the Supreme Court to then give individual states the option to expand coverage or not two years after the ACA was passed. Thirteen states, most of which are Republican-leaning, have not adopted Medicaid expansion, and this has posed concerns for those living in those states who are currently trying to receive the health coverage they recently lost due to job losses related to Covid-19. Overall, however, Medicaid enrollment is already on the rise, with an estimated 5-18 million additional enrollees in the coming months. Once this pandemic ends, the number of Medicaid beneficiaries will likely remain significantly higher than pre-pandemic times. As the Medicaid program grows in our country, it is critical to evaluate how effective the program is at serving the American people. I had the privilege of corresponding with Dr. Katherine Baicker about her notable experiment, The Oregon Health Insurance Experiment, and the lessons we can gather on the efficacy of one of the largest health insurance programs in our country. Dr. Baicker currently serves as the Dean of the University of Chicago Harris School of Public Policy, and prior to this position, she was a professor of health economics at Harvard. She also worked in the White House as the senior economist on the Council of Economic Advisors under President George W. Bush. 

Dr. Baicker famously led the 2008 Oregon Health Insurance Experiment, which was made possible as a result of Oregon deciding to expand Medicaid coverage to more low-income adults. Due to limited funds, Oregon could only provide Medicaid coverage to 10,000 of the nearly 90,000 citizens who signed up to receive health insurance. To decide who received coverage and who did not, Oregon employed a lottery system in which citizens were randomly chosen to receive Medicaid benefits. The use of a lottery system created a randomized control study, which Dr. Baicker says is “almost never available in public policy.” In this experiment, Dr. Baicker and her fellow investigators were able to study the benefits and drawbacks of the Medicaid program by tracking those who received Medicaid coverage (the experimental group) and those who did not receive coverage (the control group.)

While many politicians are quick to assert that the Medicaid program is an incredible success, it is important to note that we spend around $600 billion on the program, and some studies show that the program may go bankrupt in the near future. The Medicaid program is controversial because, as Dr. Baicker says, “Covering the uninsured never pays for itself. It would be nice to think that reductions in ER visits and more efficient use of preventative care would actually save us money in the long run. But if we are honest about it, bills proposing to cover the uninsured do not pay for themselves.” 

The Oregon Health Insurance Experiment measured several outcomes, including blood pressure, cholesterol levels, glycated hemoglobin levels (which is high in patients with diabetes), healthcare utilization, out-of-pocket spending, depression levels, smoking habits, obesity, and even voter turnout. The study revealed that two years after the lottery system was put into place, those who had access to Medicaid experienced reduced financial strain caused by medical expenses, increased preventative care utilization, decreased rates of depression, and even increased voter turnout. However, the study also showed that access to Medicaid coverage, when compared to the control group, had no significant effect on patients’ blood pressure, cholesterol levels, glycated hemoglobin levels, smoking habits, or obesity, all of which are significant drivers of chronic and expensive health conditions. Dr. Baicker says, “We found some things that people viewed as supporting Medicaid expansion and some things that people viewed as arguing against expansion. We could eliminate the unduly optimistic view of Medicaid. Some people contended that expanding Medicaid would not only improve health for low-income populations, but also get people out of the Emergency department and back into the workforce and ultimately save money. It turns out that Medicaid doesn’t save money. When you expand health insurance, people use more healthcare, and that’s great for their health, but it doesn’t save money. At the same time, we could also eliminate the unduly pessimistic view of the Medicaid program. Some people contended that Medicaid cost a lot of money but didn’t provide real benefits to enrollees. But Medicaid enrollees had much better access to care, reduced financial strain, lower rates of depression, and better self-reported health.”

As the Medicaid program grows, it is important for policymakers to be wary of an overly optimistic or pessimistic view of expanding public health insurance. As Dr. Baicker says, “Policymakers face a real tradeoff: expanding Medicaid provides important benefits to those it covers, at a substantial cost to tax-payers. Policymakers and voters have to decide how much of a priority that coverage is.”