Updated by Ezra Klein
VOx, Policy and Politics, June 22, 2015
Is Medicaid a bad idea?
That's what Tyler Cowen asks after reading a working paper from economists Amy Finkelstein, Nathaniel Hendren, and Erzo Luttmer. The paper is highly technical, but its headline finding is that a dollar in Medicaid spending doesn't lead to anything near a dollar in value for Medicaid beneficiaries.
It finds this two ways. First, if you test whether Medicaid users would pay the price of their Medicaid coverage if the government took it away, they say no. This makes some sense, as they are very poor, and one reason they have Medicaid is they don't have the money to buy insurance on their own.
The more interesting finding is the second one: if you look at where Medicaid's money goes, less of it than you might think goes to covering the uninsured — and more goes to paying back the people who are already covering the uninsured.
But the paper's conclusions are more complicated than that makes them sound. Read closely — and depending on your values — the paper either isn't saying anything very new, or it's arguing something quite radical: if Medicaid is overrated, it might be because all health insurance is overrated.