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Title: Expected consumer surplus from Medicaid in a prototypical household

Citation Type: Conference Paper

Publication Year: 2019

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Abstract: Consumer Surplus From Medicaid in a Prototypical Household Carlos A. Ulibarri, Medical Assistance Division, New Mexico Human Services Department Disclaimer The hypothesis, method of analysis and findings reported in this paper are those of the author, and do not necessarily coincide with those of the Medical Assistance Division of the New Mexico Human Services Department. “The art of dealing with any problem at the theoretical, empirical, or applied economic level is to oversimplify in an artful and useful way versus oversimplifying in some dumb, crazy way….” ~Arnold Harberger Abstract Medicaid and the Children’s Health Insurance Program (Medicaid) constitute a joint federal-state entitlement program, providing health care coverage and medical benefits to low income individuals, including families with children, pregnant women, the elderly and people with disabilities (Gruber, 2000). State Medicaid programs generally subsidize the demand for health insurance across these populations by not requiring premiums or cost-sharing, thereby impacting the welfare of millions of individuals and families across the United States through the provision of health care benefits and lower medical/insurance costs. Consequently, the impact of state Medicaid programs would seem most significant in states which have traditionally had the highest uninsured and poverty rates (Sommers and Oellerich, 2013). In 2018 Medicaid provided health care coverage and medical benefits to nearly one in five Americans, approximating 73 million individuals. New Mexico’s Medicaid program ─referred to as Centennial Care─ is administered by the Medical Assistance Division of the Human Services Department. The program currently provides health insurance coverage to 850,000 beneficiaries, approaching 40 percent of the state’s population. The most recent expansion of the program is the extension of comprehensive medical benefits to low income nonelderly adults under the Patient Protection and Affordable Care Act (ACA). New Mexico (NM) became an expansion state on January 1, 2014. At the time, the Medicaid-insured populations were approximately 600,000 in NM and 61.7 million in the US (KFF, 2018). This paper concerns the measurement of expected consumer surplus from Medicaid in a prototypical household, and the welfare implications of ‘anticipated’ changes in cost-subsidies andhealth status. Expected consumer surplus is computed from the estimation of a simple random utility model (RUM) of a household eligible to receive Medicaid benefits. The study is organized as follows. Section 2 reviews an economic rationale for household participation in Medicaid programs. Section 3 describes the RUM framework and variables explaining choice behavior. Section 4 discusses the empirical application and findings of the study. Section 5 ends the study with concluding remarks regarding the role of Medicaid in improving social welfare ─the fundamental aim of applied welfare economics.

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Authors: Carlos, Ulibarri

Conference Name: Second Biennial Population and Public Policy Conference

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Data Collections: IPUMS CPS

Topics: Population Health and Health Systems, Poverty and Welfare

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