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Does Public Insurance Crowd Out Private Insurance?

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  • David M. Cutler
  • Jonathan Gruber

Abstract

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.

Suggested Citation

  • David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5082
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    References listed on IDEAS

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    1. Janet Currie & Jonathan Gruber, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 431-466.
    2. 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 360-399, April.
    3. Currie, Janet & Gruber, Jonathan & Fischer, Michael, 1995. "Physician Payments and Infant Mortality: Evidence from Medicaid Fee Policy," American Economic Review, American Economic Association, vol. 85(2), pages 106-111, May.
    4. 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.
    5. Madrian, Brigitte & Cutler, David, 1998. "Labor Market Responses to Rising Health Insurance Costs," Scholarly Articles 2643643, Harvard University Department of Economics.
    6. 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.
    7. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    8. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-641, June.
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    Cited by:

    1. A. Abigail Payne, 2009. "Does Government Funding Change Behavior? An Empirical Analysis of Crowd-Out," NBER Chapters, in: Tax Policy and the Economy, Volume 23, pages 159-184, National Bureau of Economic Research, Inc.
    2. C. Lee, 1998. "Life Cycle Savings in the United States, 1900-1990," CPE working papers 0014, University of Chicago - Centre for Population Economics.
    3. Aaron S. Yelowitz, 1995. "The Medicaid Notch, Labor Supply, and Welfare Participation: Evidence from Eligibility Expansions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 909-939.
    4. Yelowitz, Aaron S, 2000. "Using the Medicare Buy-In Program to Estimate the Effect of Medicaid on SSI Participation," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 419-441, July.
    5. Stan McMillen & Kathryn Parr & Xiumei Song & Brian Baird, 2004. "The Kerry-Bush Health Care Proposals: A Characterization and Comparison of their Impacts on Connecticut (Technical Appendix)," CCEA Studies 2004-06, University of Connecticut, Connecticut Center for Economic Analysis.
    6. Lars Fredrik Andersson & Liselotte Eriksson, 2013. "Compulsory public pension and the demand for life insurance: the case of Sweden," Working Papers 13030, Economic History Society.
    7. Joan Costa‐Font & Jaume García‐Villar, 2009. "Risk Attitudes And The Demand For Private Health Insurance: The Importance Of ‘Captive Preferences’," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(4), pages 499-519, December.
    8. Joan Costa & Jaume Garcia, 2001. "Demand for private health insurance: Is there a quality gap?," Economics Working Papers 531, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Andersson, Fredrik & Konrad, Kai A, 2003. "Globalization and Risky Human-Capital Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 211-228, May.
    10. Dhaval M. Dave & Sandra Decker & Robert Kaestner & Kosali I. Simon, 2008. "Re-examining the Effects of Medicaid Expansions for Pregnant Women," NBER Working Papers 14591, National Bureau of Economic Research, Inc.
    11. Janet Currie & Jonathan Gruber, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 431-466.
    12. Janet Currie & Jonathan Gruber, 1997. "The Technology of Birth: Health Insurance, Medical Interventions, and Infant Health," NBER Working Papers 5985, National Bureau of Economic Research, Inc.
    13. Joan Costa & Jaume Garcia, 2003. "Demand for private health insurance: how important is the quality gap?," Health Economics, John Wiley & Sons, Ltd., vol. 12(7), pages 587-599, July.
    14. Theodore Joyce & Robert Kaestner, 1996. "The effect of expansions in medicaid income eligibility on abortion," Demography, Springer;Population Association of America (PAA), vol. 33(2), pages 181-192, May.
    15. Janet Currie, 1998. "The Effect of Welfare on Child Outcomes: What We Know and What We Need to Know," JCPR Working Papers 26, Northwestern University/University of Chicago Joint Center for Poverty Research.
    16. Jonathan Gruber & Brigitte C. Madrian, 1995. "Non-Employment and Health Insurance Coverage," NBER Working Papers 5228, National Bureau of Economic Research, Inc.
    17. Kantor, Shawn Everett & Fishback, Price V, 1996. "Precautionary Saving, Insurance, and the Origins of Workers' Compensation," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 419-442, April.
    18. Glied, Sherry & Stabile, Mark, 2001. "Avoiding health insurance crowd-out: evidence from the medicare as secondary payer legislation," Journal of Health Economics, Elsevier, vol. 20(2), pages 239-260, March.

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Crowding out (economics) in Wikipedia English
    2. Hiệu ứng lấn át (trong kinh tế học) in Wikipedia Vietnamese

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