Medicaid: What Does It Do, and Can We Do It Better?

DOI10.1177/0002716219874772
Published date01 November 2019
Date01 November 2019
Subject MatterMeans-Tested Transfer Programs
148 ANNALS, AAPSS, 686, November 2019
DOI: 10.1177/0002716219874772
Medicaid: What
Does It Do,
and Can We Do
It Better?
By
JANET CURRIE
and
VALENTINA DUQUE
874772ANN The Annals of The American AcademyWhat does medicaid do, and can we do it better?
research-article2019
This article provides an overview of the Medicaid pro-
gram and summarizes the evidence about its effective-
ness in terms of providing insurance and promoting
health. The evidence shows that Medicaid has
improved the lives of low-income people since its crea-
tion in 1965. Expansions in Medicaid have led to
increases in coverage and access to medical care,
reductions in medical debt, and improvements in
health outcomes with little evidence of significant
reductions in beneficiaries’ labor supply. Yet there are
concerns around the program’s high and increasing
costs, the quality of care provided, and difficulty
accessing Medicaid-funded care. We discuss some of
the proposed Medicaid reforms meant to address
these problems in light of previous evidence.
Keywords: Medicaid; health insurance; health care;
medical care; health policy
Medicaid—publicly funded health insurance
for low-income people—is one of the larg-
est U.S. social programs, currently providing
health insurance coverage to 73 million
Americans,1 at a cost of $565.5 billion in 2016.2
These costs accounted for 17 percent of total
national health expenditures and for about 3 per-
cent of the U.S. gross domestic product (GDP).3
The program serves four distinct populations:
lower-income children and their mothers; the
Janet Currie is the Henry Putnam Professor of Economics
and Public Affairs at Princeton University and codirects
Princeton’s Center for Health and Wellbeing and the
NBER Children’s program. She is a member of the
National Academy of Sciences and of the National
Academy of Medicine and a fellow of the AAPSS.
Valentina Duque is an assistant professor of economics
at the University of Sydney, Australia.
NOTE: We would like to thank Robert Moffitt and James
Ziliak for helpful comments, as well as Karen Dynan,
Amitabh Chandra, Nicole Maestas, and participants at
The ANNALS “Entitlement Reform” Conference. Owen
Smith provided excellent research assistance.
Correspondence: valentina.duque@sydney.edu.au
WHAT DOES MEDICAID DO, AND CAN WE DO IT BETTER? 149
disabled; elderly people in nursing homes; and, since 2014, low-income nondisa-
bled adults in states that have adopted Medicaid expansions that were allowed
under the Affordable Care Act (ACA). This heterogeneity in the populations
served, combined with the fact that each state runs its own Medicaid program
subject to federal government regulations, makes it difficult to draw general con-
clusions about the functioning and impacts of the Medicaid program and the best
options for reforming it.
In this article, we first provide a very brief overview of the program and its
history and then summarize evidence about the effectiveness of Medicaid in
terms of providing insurance and promoting health. There is considerable evi-
dence that Medicaid has improved the lives of low-income people. Yet there is
also dissatisfaction about the high cost of Medicaid, concerns about the availabil-
ity of Medicaid-funded care and the quality of care provided, and lingering con-
cerns about whether eligibility for Medicaid creates perverse incentives that
discourage self-sufficiency in able bodied people who can work. Moreover, many
Americans have incomes too high to qualify for Medicaid but too low to comfort-
ably afford private health insurance, notwithstanding the health insurance
exchanges created by the ACA (which we discuss further). The final part of this
article discusses some proposed Medicaid reforms meant to address these
problems.
Background
Medicaid was adopted in 1965, in an era when poor families had little access to
private insurance or charity care and many people lacked health care. For
instance, Goodman-Bacon (2018) shows that before Medicaid, only 40 to 50
percent of poor children had any doctor visits in a year. Medicaid greatly
increased public spending on health care for the poor, mandating a defined set
of services that were to be covered without requiring the patient to pay.
Figure 1 shows the number of Medicaid beneficiaries each year from 1975 to
2018, by eligibility category. Children are the largest single group of beneficiar-
ies. While enrollment was initially flat, the growth in the coverage of children
since the late 1980s was intentional. States were first allowed and then required
to raise income eligibility limits for pregnant women and children. These expan-
sions broke the link between welfare receipt and Medicaid coverage and allowed
children in families with higher incomes to be covered. By 2010, 48 percent of
all births in the United States were covered by Medicaid (Markus etal. 2013).
The introduction of the state Child Health Insurance Program (CHIP or
SCHIP) in 1998 further expanded coverage of low-income children.4 Between
1986 and 2005, the share of children eligible for Medicaid/CHIP increased from
between 15 and 20 percent of U.S. children, to between 40 and 50 percent of
children, depending on the age group (Currie, Decker, and Lin 2008).
Coverage of low-income, nondisabled adults and the disabled also increased
over time, especially beginning in the late 1990s, when some states raised income
150 THE ANNALS OF THE AMERICAN ACADEMY
cutoffs for these eligibility groups, and again after the passage of the ACA in
2014.
Coverage of the elderly has been remarkably constant, in part because most
medical expenditures for the aged are covered under a separate federal program,
Medicare. Medicaid primarily covers low-income elderly people in nursing
homes, who have spent down their assets so that they are poor enough to qualify.
Medicaid now covers six out of ten nursing home residents.5
FIGURE 1
Medicaid (and CHIP) Beneficiaries, By Eligibility Group, FY1975–2018 (thousands)
SOURCE: We used several sources of data to construct this figure: (1) the “MACStats:
Medicaid and CHIP Data Book” provided information on Medicaid enrollment by group from
1975 to 2013 (https://www.macpac.gov/wp-content/uploads/2016/12/MACStats_DataBook_
Dec2016.pdf), (2) the “CMS – Brief Summaries of Medicare & Medicaid” provided informa-
tion from 2014 to 2016 (https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/MedicareProgramRatesStats/SummaryMedicareMedicaid.
html), and (3) the “CMS – Fast Facts” provided statistics in 2017 and 2018 (link: https://www.
cms.gov/fastfacts/). We used the “CMS – Statistics Reference Booklet” that provided CHIP
enrollment rates from 1998 to 2016 (https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/CMS-Statistics-Reference-Booklet/2003.html) and the
“CMS – Fast Facts” for CHIP enrollment in 2017 (https://www.cms.gov/fastfacts/). CHIP
enrollment for 2018 was not available in the CMS Fast Facts.
NOTE: The numbers represent “person-year equivalents” or total individuals ever enrolled in
Medicaid/CHIP in a fiscal year. CHIP is the Children’s Health Insurance Program that was
first implemented in 1998. For Medicaid and CHIP, data are reported by individual states and
are representative of the unduplicated number of children ever enrolled in Medicaid and
CHIP. The dotted line represents a change in the source of data.

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