Many of us are currently in Health Economics and just
learned about the famous Rand Health Insurance Experiment of the 1970s which found
that people with health insurance coverage used it--they spent approximately 50% more on health care than those without it. The study also found that copayments reduced the use of
services. This famous experiment was a classic demonstration of moral hazard at
work: the concept that when people are detached from the costs of behavior,
they are more willing to take risks.
I came across this article
this summer discussing Medicaid in my home state of Oregon. This “experiment”
by the Oregon government essentially turned the Rand study into reality:
Medicaid coverage was randomly assigned to certain individuals and not to
others through a lottery system. One of the original Rand researchers, Joseph
Newhouse, is watching this scenario unfold carefully with a group of
researchers to determine the effect this lottery has on health care costs and
health outcomes. The results essentially show exactly what the Rand study did:
those with coverage spend more than those without. Moreover, those with
coverage had better health outcomes.
What is striking however, from the story, is the level of
impact that coverage really has on those in poverty. This article really gets
to the heart of a question posed to us in class: what should we be spending on
health care? We focus so much in this country on how much health care costs us,
but perhaps this article is highlighting that for many, these costs are worth
it. Quality of life improves to such a degree with insurance coverage that
maybe health care is worth spending approximately one fifth of our GDP. I just
thought I’d share it.
2 comments:
Thanks for this article, Justin! This quote made me stop and think:
" The insured also spend more on health care, dashing some hopes of preventive-medicine advocates who have argued that coverage can save money"
It seems that we as a community continue to focus on lower overall healthcare costs as the endgoal of better care / more preventative care / universal insurance / etc, and yet the research has shown pretty consistently that increased use of medical care leads to even more increased use of medical care. There are two possible routes we can take from this: we could shrug our shoulders, cite the common good for society, and move forward anyhow with no measureable endpoints, OR we can redefine what success looks like. It seems rational that better overall health in a community should show up in other outcomes, such as a stronger economy / higher productivity, better graduation rates as children are able to stay in school longer, or others. Is anyone aware of studies evaluating the impact of expanded or improved care on economic or other indirect measures?
This study was important in dispelling the notion that if you're on Medicaid you're worse off than not having any health care coverage option. Thanks for sharing.
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