More study needed

By C.H. | NEW YORK

NEXT year will bring a huge expansion of Medicaid, the federal-state health programme for the poor. It won’t be quite as big an expansion as Barack Obama hoped, thanks to last year’s Supreme Court ruling that made the expansion optional for each state. But the federal government is poised to spend billions to help willing states extend health insurance to the poor.

Nealy half of the states appear ready to forgo the expansion, with critics believing it not worth the money. Now a new paper has sparked a fresh round of debate over the issue. The study, published in the New England Journal of Medicine, marks the first time that the principles of a randomised trial have been applied to Medicaid. Short on the funds need to cover everyone, in 2008 Oregon used a lottery to draw names of poor adults to participate in its Medicaid programme. This allowed Harvard’s Katherine Baicker and MIT’s Amy Finkelstein to examine the effect of Medicaid on the physical and financial health of poor adults, compared with a control group that didn't receive coverage.

The results were mixed. With two years of data, it seemed that Medicaid had a big impact on patients’ financial health. It all but wiped out catastrophic health spending (when costs exceed 30% of a patient’s income). It also slashed by half the probability of needing to borrow cash or skip other bills due to medical expenses.

But it had little apparent impact on patients’ health. There was no statistically significant effect on the treatment of hypertension. It improved the diagnosis of diabetes and use of diabetes drugs, but with no apparent change to haemoglobin A1C levels. These mediocre health results had a price. Annual medical spending was 35% higher for Medicaid patients, compared with the control group.

Democrats, disappointed with the results, have raised some legitimate concerns about the study. It measured changes to a relatively small sample over just two years, whereas the fight against chronic disease is measured over decades. And, as Ezra Klein notes, "Other studies with a less rigorous—but still credible—design and a longer timeframe have shown that states that expanded Medicaid saw a six percent drop in death rates among the newly insured group."

This has not stopped critics of Medicaid from interpretting the results as evidence of the programme's ineffectiveness. But the study, if accurate, seems to speak to the meagre effect of health insurance on outcomes more generally. Few critics have decided to give up their own coverage. That is likely due to lingering doubts about the results, and also because the financial impact of insurance is real. If we can agree on that, then the main question becomes not whether to do away with Medicaid, but what Medicaid should look like.

Ross Douthat lays out one option: "If the best evidence suggests that health insurance is most helpful in protecting people’s pocketbooks from similar disasters, and that more comprehensive coverage often just pays for doctor visits that don’t improve people’s actual health, then shouldn’t we be promoting catastrophic health coverage, rather than expanding Medicaid?" If the results of the Oregon study are accurate, this would make sense. The government ought to be stingy if its money is not leading to better health outcomes—this general rule goes for the poor as well as the elderly.

For now, though, the takeway from the Oregon study is...more study is needed. And a massive experiment in Medicaid is already underway. Oregon is one of many states that have recently set out to transform their Medicaid programmes through the expansion of managed care. The state has hired “co-ordinated care organisations” (CCO) to oversee the treatment of Medicaid patients. The idea is to lower state costs by keeping patients well. (These CCOs began their work in August, well after the end of the New England Journal study.) This is part of a broader effort to flip the perverse incentives of America’s fee-for-service health system. But the Medicaid experiments are the most aggressive, in part because states are so keen to lower costs and in part because it is easier to transform care for the poor than for stubborn middle-class voters. The expansion of Medicaid managed care may fail. Or it may provide a model for the rest of the country. Either way, it is too soon to abandon Medicaid just yet.