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Medicaid’s Impact

Randomized study sheds light on the effect of expanding health-care coverage

Enrollment in Medicaid helps lower-income Americans overcome depression, get proper treatment for diabetes, and avoid catastrophic medical bills, but it does not appear to reduce the near-term prevalence of diabetes, high blood pressure, or high cholesterol, according to a new study coauthored by MIT economist Amy Finkelstein.

The study, a randomized evaluation comparing health outcomes among more than 12,000 people in Oregon, employs the same approach as a clinical trial. Its findings bear on the implementation of the federal government’s Affordable Care Act, which gives funding to states to expand Medicaid, the program administered jointly by the federal government and the states to provide health insurance for (mostly) low-income U.S. citizens. A paper based on the research appeared in the New England Journal of Medicine in May.

The researchers worked with the Oregon Health Study Group to analyze Medicaid’s impact over a two-year span. They found about a 30 percent decline in the rate of depression among people on Medicaid over that time, thanks to treatment; an increased probability of being diagnosed with, and treated for, diabetes; and increases in use of preventive care. They also found that Medicaid reduced, by about 80 percent, the chance of having catastrophic out-of-pocket medical expenses, defined as spending 30 percent of one’s annual income on health care.

“That’s important, because from an economics point of view, the purpose of health insurance is to … protect you financially,” says Finkelstein. She and Katherine Baicker of Harvard University’s School of Public Health led the study.

The researchers did not find any change in three other health measures: blood pressure, cholesterol, and a common indicator of diabetes. However, Baicker notes that Medicaid increased the use of services such as mammograms, cholesterol screening, doctor’s office visits, and prescription drugs.

The study uses data from a unique lottery program the state of Oregon founded in 2008, in which about 90,000 people applied for roughly 10,000 newly available slots to gain Medicaid coverage. That lottery generated a group of residents covered by Medicaid who were otherwise similar to a control group of applicants still lacking coverage.

“We recognized the lottery as a literally once-in-a-lifetime opportunity to bring the rigors of a randomized controlled trial, which is the gold standard in medical and scientific research, to one of the most pressing social policy questions of our day,” Finkelstein says.

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