Political Illusions
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No, Medicare and Medicaid Are Not Worse than No Insurance at All

Austin Frakt continues to try to educate Avik Roy:

Debating Medicaid | The Incidental Economist: Recall that the UVa surgical outcomes study that includes quite a large set of controls illustrated that not only Medicaid but also Medicare is associated with worse health outcomes than no insurance at all. Why is that? One can claim that Medicaid leads to “family breakdown and social disrepair” (though one had better point to quite a pile of scientifically credible literature before I believe that’s the source of the problem with the IV approaches). But where does that leave Medicare? What’s the story there? Why is the UVa study telling us the right causal story in that case? It just doesn’t hang together.

Ultimately, I don’t see why we need to reject the studies that do reveal a credible causal link between Medicaid and improvements in health. They do not, and cannot, tell us that Medicaid is great in all possible ways. It is a program in need of reform. We can agree on that without needing to reject the good work that shows it is not bad for health. As I wrote before, I would worry about claiming that a study like the UVa one is sufficient for causal inference. My concern would be that any reform to Medicaid – even the one advocated by Avik Roy — would yield similar results based on a similar study, and, therefore, one would have to conclude that there is no program for that population that beats no insurance. (The results for Medicare show us that is likely since it does not have an association with the same social dynamics or provider restrictions as Medicaid.)

What will those who interpret such a study’s results causally say then? Actually, under a causal interpretation, the policy implication would be clear. Revoke Medicaid. Revoke Medicare. Replace them with nothing. Save a fortune, and produce better outcomes at the same time. The only problem is, that’s totally wrong because the study is one of associations, not causation, and the findings suffer from some selection bias. Even the authors of the UVa study admit as much. On what grounds could any reader of their paper steadfastly claim otherwise?

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