How Well Does the U.S. Government Provide Health Insurance?

The debate over universal health insurance (HI) in the U.S., as well as the proper role of the government in the HI market, has been quite heated. Fueling this debate is the uncertainty pertaining to the benefits of HI in general, and the relative benefits of private versus public HI in particular. This uncertainty stems from non-random selection into different types of HI (private, public, or none) in combination with the absence of experimental data. Moreover, the lack of typical exclusion restrictions complicates identification of the causal effects of different HI types. Here, the aim is to assess the causal impact of private HI, relative to public HI, on the insured infant's health. To that end, this study employs the methodology proposed in Altonji et al. (2005) which trades off what can be learned in exchange for not requiring an exclusion restriction. Nonetheless, the method remains quite informative in the present context. Specifically, using data from the Early Childhood Longitudinal Survey, Birth Cohort (ECLS-B), along with several measures of infant health, the results suggest that while private HI is {\it associated}\ with improved infant health, this association disappears once selection on observables and unobservables is considered. In fact, the estimated effects of private HI are predominantly {\it negative}\ once both types of selection are admitted. Further analysis reveals that the likely beneficial effects of public HI are due to greater coverage for infants at a much lower cost.