More on the Oregon Medicaid Study

My last post responding to Raj Chetty's NYtimes column on economics as a science has received a good deal of attention (at least compared to my previous posts) largely thanks to Tyler Cowen, Scott Sumner, and Bob Murphy linking to it on their blogs. I obviously would like to extend my thanks to these economists for helping get this blog more attention.

I also noticed that the main criticism of my post in the comments on both this blog and other blogs is my handling of the Oregon Medicaid Study. A few points:

1.) The Oregon Medicaid Study did indeed show no statistically significant improvement in objective measures of physical health. I am a bit surprised that so many people have taken issue with this assertion. The common response is that there were positive results, but they just weren't positive enough to be statistically significant. In order to be statistically significant, results have to have less than a 5% chance of being statistical noise. In the Oregon study, the positive results on elevated blood pressure had a 65% chance of being statistical noise, the positive results on elevated blood sugar had a 61% chance of being statistical noise, and the positive results on high cholesterol had a 37% chance of being statistical noise. In other words, not only were the results not statistically significant. They weren't even close.

It's actually worse than that. If we just look at raw numbers and ignore statistical significance, we can also say that Medicaid increases smoking and decreases cardiovascular health of those that were already sick. The raw numbers suggest that. Of course, neither of these results are statistically significant, but they are closer than any of the other measures. There is only a 24% chance that the results showing Medicaid reducing cardiovascular health are statistical noise, and there is only an 18% change that the results showing Medicaid increasing smoking are due to statistical noise. These still are far from statistically significant, but if one is going to argue that the raw numbers that are statistically insignificant are useful in telling us the effect of Medicaid, then they should also be arguing that Medicaid increases smoking and worsens cardiovascular health of the already sick.

I would argue that we shouldn't read too much into any of the statistically insignificant results and instead focus on the statistically significant ones. By the way, that data is from Megan McArdle who had an excellent post on this very topic.


2.) I also think many people assumed that I was making an argument based on the Oregon study that I was not. I was not trying to argue that the Oregon study was an indictment of Medicaid. I was simply arguing that it was not a vindication of Medicaid. We can quibble about the results, but this study was not a big win for Medicaid. That much should be clear. Chetty seemed to imply that this study was a big win for Medicaid in its current form, and that was the claim I took issue with.

What the study did indicate was that spending money on health care for the poor helps the poor (which should be rather obvious). The statistically significant results on financial security and mental health show that having a program of this sort is worthwhile.

To put it simply, the Oregon study showed that Medicaid does a good job of protecting the poor from crushing medical expenses, but it doesn't make them healthier or save lives.

This result does, I would argue, bolster the case for reforming Medicaid. If we, for example, moved towards a system where Medicaid provided catastrophic insurance plus a subsidy that can be used to purchase supplemental private insurance or start some sort of health savings account (as some states are already doing), this program would still protect the poor from crippling medical expenses. It also would offer them more choice, improve the quality of care they receive (which is big problem with Medicaid), and help constrain costs.

Of course, there are many other proposals for reforming Medicaid (Tyler Cowen has a interesting one as well). The main takeaway from this study is that there is nothing special about the form Medicaid currently takes, and that, therefore, we should not be afraid of looking at serious reform.