STUDY: Medicaid Provides Better Insurance Than Private Coverage And Medicare

Medicaid gets a bad rap from a lot of conservatives for poor access to health care and poor health outcomes. It’s one of the main arguments in favor of schemes to cut Medicaid funding and block grant it to the states, on the grounds it will promote efficiency and innovation in the program.

But a new study in the Journal of General Internal Medicine found that when you compare the proper groups, Medicaid actually does a better job delivering access and affordable coverage than either private coverage or Medicare.

As Aaron Carrol summed up at the Incidental Economist, the study focused on the underinsured — that is, people on insurance plans that just aren’t very good — rather than those who have no insurance. More importantly, it only looked at people at or below 125 percent of the poverty line. That’s important because the problem with the studies showing Medicaid delivering inferior results to private coverage is that it’s difficult for their comparisons to avoid the apples-to-oranges problem. Medicaid is meant for poorer Americans — you have to be below a certain income threshold to qualify for it — but private coverage is available to the poor and well-off alike. It’s a matter of basic economic logic that the private plans only the well-off can afford will will provide much better access and quality care then the plans the poor can afford as well. Products poor people can afford tend to be poor products.

That’s why safety net programs like Medicaid, which provide people more assistance than they could afford in a pure free market world, are so important. And why, when the proper apples-to-apples comparison is made between poor people on private insurance and poor people on Medicaid, the latter’s performance improves remarkably:

For the purposes of this study, underinsurance was defined as (1) having out-of-pocket expenses that were more than 5% of household income, (2) delaying or failing to get needed medical care because of cost, or (3) delaying or failing to get needed medications because of cost. This study specifically looked at adults who had full-year continuous coverage in some form, but had an income less than 125% of the poverty line. They specifically wanted to know how many of those people were still underinsured.

They found that more than a third of these adults were underinsured. What’s more is what kind of insurance left people underinsured. More than 65% of those people on Medicare were underinsured. More than 37% of people with private insurance were underinsured. But only 26% of people on Medicaid were underinsured. People who were underinsured were more likely to be White, in poor health, and unemployed. Even after adjusting for these factors, those on Medicaid were significantly less likely to be underinsured than those on private insurance (odds ratio 0.22).

The gap between Medicaid and Medicare, meanwhile, is most likely due to Medicare’s higher co-pays and other forms of cost-sharing. While this generally won’t be a problem for seniors in the middle class and up, it can be difficult for poor seniors to meet their share of the costs.


Other studies have come to similar conclusions as the one above. The Government Accountability Office found that people on Medicaid didn’t report any more difficulties obtaining medical care or prescription medicines than people on private insurance. Medicaid does have a problem when it comes to providing adequate dental care, and the GAO found more complaints from Medicaid recipients on that score. Children on Medicaid also tended to fair better than adults on Medicaid. And among the Medicaid recipients who did report difficulties, more of them cited long wait times, delayed appointments, and difficulty contacting providers than people on private coverage.

So Medicaid does have its challenges. Its reimbursement rates for doctors are significantly lower than Medicare’s, meaning that more care providers are willing to accept Medicare patients, and the program’s access and networks are better — assuming the recipient can afford the cost-sharing. But the way to fix this is to bulk up government spending on Medicaid, which is currently well below Medicare’s levels. And Carrol lays out a number of ways the health care reform passed by President Obama and the Democrats will improve things.

It’s entirely possible, even likely, that people on Medicaid suffer lackluster health outcomes not because they’re on Medicaid, but because they’re poor. Obviously, cutting and block-granting the program would make this situation worse, not better.