Medicaid Is Asset Building?

A new study came out this week evaluating the impact Medicaid coverage has on participants’ health, financial lives, and general well-being. Sarah Kliff describes the study design:

The research uses data from Oregon, where the state held a lottery among low-income adults in 2008 for a limited Medicaid expansion. Of the 90,000 people who applied, 10,000 ultimately gained coverage. The lottery gave researchers a unique opportunity to conduct the first randomized experiment on Medicaid coverage, by studying those who gained insurance through the lottery and comparing them against a similar group of adults who did not.

The randomization of the study is an important feature: other studies have struggled to control for the differences in people who seek out Medicaid coverage and those who do not (but may be eligible). As Joe Colucci from New America’s Health Policy team explains, “That created an incredible research opportunity – the randomized design allows researchers to really see the effect of Medicaid enrollment on people’s health, and hopefully put to bed the nonsense idea that Medicaid is bad for people’s health.”

The study looked at what impact Medicaid coverage has on people’s physical health, as measured by things like blood pressure, cholesterol levels and other “easy to obtain” indicators. In the two year study period, the researchers found “few short-term physical health gains,” which came as a surprise and disappointment to some and as fodder for others to decry the program as ineffective. (The results on the physical health side are complicated and mixed, but I would refer you to Kevin Drum’s analysis for more on some of the statistical issues at play. A question posed Aaron Carroll and Austin Frakt is also relevant here: “How many people saying that are ready to give up insurance for themselves or their family?”) 

From an asset-building perspective, the really amazing finding from the study is on the impact Medicaid coverage had on participants’ financial security. Jonathan Cohn explains:

The big news is that Medicaid virtually wiped out crippling medical expenses among the poor: The percentage of people who faced catastrophic out-of-pocket medical expenditures (that is, greater than 30 percent of annual income) declined from 5.5 percent to about 1 percent. In addition, the people on Medicaid were about half as likely to experience other forms of financial strain—like borrowing money or delaying payments on other bills because of medical expenses.

I bolded parts of that because I really want to emphasize what a striking impact having health insurance had on people’s financial situations. On top of the benefits to low-income people’s financial security, the study also reported “significant improvements in mental health outcomes, with rates of depression falling by 30 percent.” As Reid Cramer pointed out this week on a webinar about the Affordable Care Act and asset building impacts, a whopping 29 million Americans have used up their savings trying to pay off a medical bill and 17 million have been in a situation where they took on more credit card debt to cover medical costs.

Even if we can’t evaluate the immediate physical health benefits, this new study gives us a lot of positive results to work with. Medicaid is important because it averts exactly the type of financial crisis we’re referencing every time we make the case for asset building. Health insurance is an effective way to help a family manage a health-related incident that otherwise might wipe out their entire life savings and threaten any semblance of future security. As Cohn points out, it’s a value judgment whether you think that benefit is worth the cost of public investment.

I’ll let Cohn have the final say on the matter because he really says it all (read his whole take here):

Whatever its effects on health, it promotes economic security. “The primary purpose of health insurance is to protect you financially in event of a catastrophic medical shock,” Finkelstein told me in an interview, “in the same way that the primary purpose of auto insurance or fire insurance is to provide you money in case you’ve lost something of value.” And while only a small portion of people will experience financial shock in any given year, over time many more will—which means many more will benefit from the protection that Medicaid provides.

We call it health insurance because it’s insurance. While having health insurance may promote and support good health, even if it doesn’t or only does to a modest degree, there is still value in having it because it means you are not going to be financially debilitated by a medical event.

Cohn concludes thusly:

Financial protection is the reason most Americans who can afford health insruance buy it. If that rationale is good enough for everybody else, why isn’t it good enough for the poor?