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Does Public Insurance Crowd Out Private Insurance?

  • David M. Cutler
  • Jonathan Gruber

One popular option for health care reform in the U.S. is to make particular groups, such as children, eligible for public health insurance coverage. A key question in assessing the cost of this option is the extent to which public eligibility will crowd out the private insurance coverage of these groups. We estimate the extent of crowdout arising from the dramatic expansions of the Medicaid program during the 1987-1992 period. Over this time period, Medicaid eligibility for children increased by 50 percent and eligibility for pregnant women doubled. We estimate that between 50 percent and 75 percent of the increase in Medicaid coverage was associated with a reduction in private insurance coverage. This occurred largely because employees took up employer-based insurance less frequently, although employers may have encouraged them to do so by contributing less for insurance. There is some evidence that workers dropped coverage for their family and switched into individual policies.

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File URL: http://www.nber.org/papers/w5082.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5082.

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Date of creation: Apr 1995
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Publication status: published as Quarterly Journal of Economics, May 1996, 111(2), pp.391-430
Handle: RePEc:nbr:nberwo:5082
Note: HC HE PE
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  1. Janet Currie & Jonathan Gruber & Michael Fischer, 1994. "Physician Payments and Infant Mortality: Evidence from Medicaid Fee Policy," NBER Working Papers 4930, National Bureau of Economic Research, Inc.
  2. Gruber, J. & Currie, J., 1994. "Saving Babies: The Efficacy and Cost of Recent Expansions of Medicaid Eligibility for Pregnant Women," Working papers 94-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Rebecca M. Blank & Patricia Ruggles, 1993. "When Do Women Use AFDC & Food Stamps? The Dynamics of Eligibility vs. Participation," NBER Working Papers 4429, National Bureau of Economic Research, Inc.
  4. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
  5. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  6. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  7. Currie, Janet & Gruber, Jonathan, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 431-66, May.
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