Not Worth It

Medicaid's costs


In 2013, a study by a group of the nation's leading health policy scholars found that being on Medicaid had no statistically significant effect on people's measurable health outcomes. The study grew out of the Oregon Health Insurance Experiment, a first-of-its-kind study that randomly assigned Medicaid to part of a 10,000-person study group while leaving another part of the group as a control. Randomized-controlled trials like this are considered the gold standard of social science research.

Two years later, the experiment continues to bear fruit. In June, the Massachusetts Institute of Technology health economist Amy Finkelstein, one of the authors of the 2013 study, and co-authors Nathaniel Hendren and Erzo F.P. Luttmer published a National Bureau of Economics Research paper examining the value of Medicaid to its beneficiaries. What they found was that for every dollar spent on the program, which is jointly financed by states and the federal government, the welfare benefit to recipients is generally between 20 and 40 cents, with a low-end possibility of about 15 cents.

"Across a variety of alternative specifications," the authors write, "we consistently find that Medicaid's value to recipients is lower than the government's costs of the program, and usually substantially below." In short, the best study of Medicaid ever conducted suggests that it isn't worth what it costs to provide. Yet this is rarely acknowledged by the government-or factored into analyses of the program's value.