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Paper Session

Sunday, Jan. 7, 2018 1:00 PM - 3:00 PM

Marriott Philadelphia Downtown, Meeting Room 405
Hosted By: American Economic Association
  • Chair: Jason Fichtner, George Mason University

Targeting with In-kind Transfers: Evidence From Medicaid Home Care

Lee M. Lockwood
Northwestern University
Ethan Lieber
University of Notre Dame


Many of the most important government programs make transfers in kind as opposed to in cash. Making transfers in kind has the obvious cost that recipients would at least weakly prefer cost-equivalent cash transfers. But making transfers in kind can have benefits as well, including better targeting transfers to desired recipients. In this paper, we exploit large-scale randomized experiments run by three state Medicaid programs to investigate this central tradeoff for in-kind provision. Despite the large distortion from the in-kind provision of formal home care, the benefit from better targeting transfers to high-marginal utility types appears to be even greater. This highlights an important cost of recent policy reforms that move toward more flexible, cash-like benefits.

The Political Economy of Medicaid: The Influence of Ideology on Eligibility, Delivery, and Reimbursement

Claire Lim
Cornell University
Jee Hun Choi
Cornell University


We investigate the influence of government ideology in U.S. states on geographic variation in Medicaid program design and operations from the mid-1990s to 2013. Medicaid expands primarily in liberal states during times when the Democratic party is in power. Simultaneously, fee-for-service reimbursement rates for physician services have been notably lower in liberal states. These patterns raise the following question: To what extent does Medicaid expansion induced by liberal state governments lead to re-allocation of resources from populations with greater need to those with less? Resource reallocation in such cases can easily be sustained as a political equilibrium under liberal state governments for two reasons. First, while eligibility is visible to voters and is decided by career politicians, it is relatively difficult to acquire information about reimbursement rates and such rates are determined by bureaucrats. Second, the budget neutrality requirement induces new cost-saving measures when Medicaid expands.

Our analysis consists of four steps. First, we establish the causal effects of state government ideology on eligibility expansion. To address spurious correlation due to population characteristics and the decision on whether to expand, we use a regression discontinuity design to capture quasi-random changes in state government ideology, and use simulated eligibility in place of the proportion of eligible population. Second, we explore the tradeoff between breadth of eligibility and reimbursement rates as well as the choice of delivery methods (fee-for-service vs. managed care). We characterize various conditions in which Medicaid expansion induces cost-saving measures such as transition to managed care and reduction in fee-for-service reimbursement rates. Finally, we explore resource allocation across eligible categories. We document the extent to which broader eligibility among healthier population categories (e.g., children) reduces expenditures on the elderly and disabled. In sum, this study explores the interplay between political environments, the scope and delivery of Medicaid, and their interactions with health care industry characteristics.

Did the Affordable Care Act’s Medicaid Expansion Increase the Ability of Low-income Households to Self-insure?

Daeyong Lee
Iowa State University


This article examines the effects of the Medicaid expansion on household financial income by focusing on the Affordable Care Act. The Affordable Care Act extended Medicaid coverage to childless adults and eliminated the asset-test for its eligibility. Using the March Current Population Survey Supplement data, the author finds that households with no dependent children and income below the 100% federal poverty level living in Medicaid-expansion states significantly increased the annual dividend (interest) income by $63 ($84) after the Medicaid expansion. At the same time, the financial assistance these households received from relatives or friends decreased by $159 after the expansion.

Effects of Medicare Coverage for the Chronically Ill on Health Insurance, Utilization, and Mortality: Evidence from a Coverage Expansion for End-Stage Renal Disease

Martin Sparre Andersen
University of North Carolina-Greensboro


I study the effect of the 1973 expansion of Medicare coverage to individuals with
End-Stage Renal Disease (ESRD) on insurance coverage, health care utilization, and
mortality. Between the ESRD expansion and a simultaneous expansion of Medicare
coverage to long-term Social Security Disability Insurance (SSDI) recipients, insurance
coverage increased by 4.4 to 8.3 percentage points and the bulk of the increase in
insurance coverage was due to an increase in Medicare coverage. The expansion was
also associated with an increase in physician visits and a seven log point reduction in
mortality from kidney disease, which I replicate in cross-country comparisons. Lastly,
I provide evidence for two mechanisms that affected mortality: 1) an increase in access
to and use of treatment, which is plausibly driven by changes in insurance coverage;
and 2) an increase, by 1975, in entry of dialysis clinics in areas with a greater burden of
kidney disease in 1971. Based on changes in the ages at which people died form kidney
disease and all other causes, the ESRD program cost between $29000 and $245000 per
life year saved, which includes a range of welfare improving values.
JEL Classifications
  • I1 - Health