Do Results of Oregon’s Medicaid Lottery Boost the Case for Obamacare?

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One of the many debates over the new health care law is whether increased access to health insurance really improves the public’s overall health and financial security. Even though there are hundreds of studies comparing insured and uninsured groups of people, there’s nothing definitive so far that answers the question one way or the other. The problem is getting clean data which clearly demonstrates behavior before and after people have had access to health care, rather than comparing two separate groups of people.

But a new study by a group of economists and health care researchers may provide the first empirical evidence that shows expanding health care coverage to low-income individuals does result in better reported health, more preventative care, and improved financial well-being.

The study looks at the first year of results following Oregon’s Medicaid lottery in 2008, in which the state added an extra 10,000 people to its Medicaid plan — a natural experiment that provided a handy bit of research and cost-benefit analysis, considering that in 2014 between 16 million and 20 million new people are expected to be added to Medicaid under the new health-care law, which requires states to extend Medicaid to all adults up to 133 percent of the federal poverty level.

Here’s the abstract:

In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid. This lottery provides a unique opportunity to gauge the effects of expanding access to public health insurance on the health care use, financial strain, and health of low-income adults using a randomized controlled design. In the year after random assignment, the treatment group selected by the lottery was about 25 percentage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group.

The study found that having insurance boosted individual spending on medical care by an extra $778, about a 25% increase. Here’s a breakdown:

  • 30% increase in the probability of having a hospital admission.
  • 15% increase in the probability of taking prescription drugs.
  • 35% increase in the probability of having an outpatient visit.

People also sought more preventative care once they were covered:

  • 20% increase in the probability of having one’s blood cholesterol checked.
  • 15% increase in the probability of ever having one’s blood tested for high blood sugar or diabetes.
  • 60% increase in the probability of having a mammogram within the last year among women 40 and over.
  • 45% change in the probability of having a pap test within the last year (for women).

The study also found a statistically significant decline in measures of financial strain:

  • 25% decline in the probability of having an unpaid medical bill sent to a collection agency.
  • 35% decline in having any out-of-pocket medical expenditures.

Lastly, the study did show that people self-reported improved physical and mental health after having access to health insurance:

  • 10% increase in the probability of screening negative for depression.
  • 25% increase in the probability of reporting one’s health as good, very good, or excellent.
  • 32% increase in self-reported overall happiness.

The authors weren’t sure whether the low-income participants would actually feel worse about their health once they learned more about it. Though much of the self-reported improvement happened almost immediately after enrollment (before new enrollees even sought medical treatment), it suggests that much of the change was due to an improved overall sense of well-being, rather than any improvements in physical health.

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  1. Scott Templeman says:

    I don’t think anyone on either side of the issue was questioning if people who couldn’t afford health care were offered it gratis that they would use it. Oregon was a “trail blazer” in the medical insurance area in the 90′s, but (predictably) their costs snowballed, with the annual price tag doubling within 5 years, and they ultimately had to gut their cutting-edge program. When you force insurance, it’s not insurance anymore.

    Furthermore, I question the benchmarks of “success.” We all know health care costs are ridiculously out of hand. For a healthy person in the control group, what’s the incentive to go pay a large sum of money to confirm one’s good health? How about a stat that would be rock solid and not subject to the inaccuracies of self-reporting: Mortality rates (the ultimate gauge of health).

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  2. frankenduf says:

    improved access improves health- gee, i wonder who would ‘debate’ against such an assertion and which health insurance co. they work for

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  3. Brian says:

    If someone else paid for my insurance premiums and deductibles, I’d self-report an increase in overall happiness too!

    Seriously however, isn’t there a selection bias built-in to this kind of study. Registering for medicare, even if free, requires some foresight and effort. Among the 10,000 people offered the coverage, the people who accept are likely to be the ones who are more motivated, less depressed, more conscientious, more responsible, etc. They’re going to take better care of themselves given free insurance or not.

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    • David V says:

      Wouldn’t the control group here be the people who registered for the lottery but weren’t picked? Doesn’t that eliminate the selection bias? The acceptance/selection rate was low, so there are ample people to serve in the control group.

      Joe, in the comment below, suggests the people were selected. According to the NYT article, the people who “won” the lottery were only screened to ensure they met the eligibility criteria. Otherwise, they were selected randomly.

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  4. joe says:

    Are you calling it a “natural experiment” because it was a lottery? The State still selected the lottery pool, however, so that seems to bias it against “natural” just as much as selecting your sample from many available participants.

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  5. Michael M says:

    Actually, the original premise of this article is fundamentally flawed: Where in the healthcare debate was anyone suggesting that people wouldn’t be better taken care of (“healthier”) and better off financially if they were given free care? Suppose we ask the Oregon taxpayer (most of which are likely represented in the lottery pool) about their financial security or sense of well being after shouldering the load for more social services? To draw the conclusion that this somehow supports the logic behind Obamacare is absurd. Come on Freakonomics…we expect better than this.

    I am certain the author will not respond as he is probably working on a summary of freeloaders who felt less hungry and better off nutritionally after they were given free (ie: paid for by the working taxpayer) food. That should be enough for us all to just “feel better” about ourselves and therefore provides the proof necessary for the next wave in social wealth redistribution.

    Hot debate. What do you think? Thumb up 12 Thumb down 9
  6. John says:

    Of course those things would go up. That’s because someone’s paying for it. Wait 5 years and then do a study on those same individuals and you’ll see that they let their health decline because they knew they someone else was going to pay for it so they didn’t bother taking care of themselves. Not to mention that you still have to study the effect it will have on other people’s incomes because of the higher taxes they are going to have to pay. Not to mention the effect it will have as doctors become more scarce (which happened in Canada when they created their system). Doctors won’t make any money so a career in medicine will not be as appealing as it used to be so new students won’t go into the profession. This scarcity will raise costs even further. We’ll eventually result in the lottery system that a province in Canada has where you are praying and hoping to get a call telling you that you won the lottery to get into the practice of a general practitioner.

    There are ripples that will negatively impact the system and people as well that you still have to analyze before you can say that this study is a case for Obamacare.

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    • Jason W says:

      John,

      Your argument is incorrect. In Canada, Australia, UK where there is reasonable health care for all (and has been for decades), life expectancies are higher than the US and infant mortality is lower. As the years go by the gap between the US and these other similar countries continues to increase, with the US lagging further and further behind. And the cost of healthcare as a percentage of GDP is lower in Canada/Australia/UK than US. In other words the US has an expensive health system which performs poorly. These are the facts.

      The data on actual health outcomes looking at the US vs Canada/UK/Australia holds true even if you look at specific demographics. eg Middle class whites, poor whites, people with obesity etc etc etc.

      Obama attempts to reform this situation are based on empirical data and some routine logic. The fact that Americans live three years less than their compatriots in other English speaking countries is damning, and should considered a “right to life” issue. Not to mention the phenomenal cost of the current US system to the taxpayer and individual.

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  7. Chris F says:

    Why is it that, when stories appear on the subject of healthcare in the USA, all logic seems to depart normally rational and measured respondees?

    If it was just about $s then you would think the same demographic would object vociferously to expense on such as, say, Iraq – but the opposite seems to be the case.

    Perhaps a study on that issue might evince more interesting – and ultimately useful – results?

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  8. Tom says:

    Of course they are happier and more financially stable. They just took all their medical costs and passed them to the taxpayers. Notice utilization of the system went through the roof. Now do a study on on the cost of expanding Medicaid.

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