Why Expanding Medicaid Doesn't Always Make People Healthier

New research shows that having affordable health insurance can improve people's health -- but only if a state’s health-care system actually works.
by | September 2015

When a team of researchers seized on a rare opportunity in Oregon to get real cause-and-effect answers to a politically charged question -- does Medicaid make people healthier? -- there was no doubt that their findings would get attention. And when those findings appeared to undercut the Medicaid expansion that’s a key aspect of the Affordable Care Act (ACA), just as the federal law was going into effect, critics seized on them to declare the policy a failure before it even fully started.

But the first reading of the findings was never really fair, and a newer study in the journal Health Affairs helps underscore why. The study adds a caveat to the answer to the above question. Medicaid does make people healthier -- but only if a state’s health-care system actually works.

The Oregon Health Insurance Experiment, as the earlier study was called, started in 2008 when the state expanded Medicaid. Since there were only a limited number of slots available, however, the state held a lottery. That gave a team of researchers from Harvard, MIT and other institutions a unique chance to compare over time the health of those who got in with those who didn’t.

Their findings came out in three separate reports, with the first noting positive things: People in the Medicaid group were actually going to the doctor and feeling less depressed because they finally had some financial security. But next came findings that, among the Medicaid group, there was no statistically significant improvement in chronic conditions such as hypertension and diabetes. And then, just as the ACA’s wider Medicaid expansion was kicking off in 2014, the researchers found that Oregon’s earlier expansion coincided with a huge spike in emergency room use.

To Medicaid’s critics, the Oregon study was a cautionary tale that should discourage other states from expanding the program. But to its supporters, there are a couple of problems with that interpretation. First, they argue, we shouldn’t discount the financial and psychological benefits of having insurance. And second, the results, particularly those surrounding ER use, were a symptom of a dysfunctional health-care system that Oregon has since taken pains to reform. The overhaul included assigning every beneficiary a primary-care team within a comprehensive health network. As a result, the state is now seeing significant improvements in ER use, hospitalizations and health outcomes.

(National Bureau of Economic Research)

The new study published in Health Affairs focuses on a different program in a different state, but its lessons are instructive to this debate. Before Ohio expanded Medicaid in late 2013, the state had received a waiver to do a smaller-scale project in the state’s largest county, Cuyahoga. The county-owned MetroHealth System and two federally qualified health centers would provide comprehensive care to people earning at or below 133 percent of the federal poverty level. Through extensive use of electronic health records that allowed for information sharing, along with team-based primary care and nurses acting as coordinators across the system, Cuyahoga wanted to show that it could improve health outcomes.

About 30,000 patients signed up, and they showed significant improvements in diabetes compared with a control group of similar patients who remained uninsured during the study period. Costs came in about 30 percent below the cap for the program, which had to be budget-neutral under federal waiver rules.

The outcome in Cuyahoga County certainly wasn’t perfect. Hypertension, for example, wasn’t significantly improved. But what the evidence does show is that failure isn’t written into Medicaid’s code. It’s subject to the same frailties that can doom any ambitious enterprise.