A closely watched study of Oregon’s 2008 Medicaid expansion has prompted some scholarly second-thoughts on the benefits of the program. While not all bad news, the results published yesterday in the New England Journal of Medicine (link is to free preview) are less than optimal.

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.

Tyler Cowen has collected some responses and offers insight of his own.

The key question here is how we should marginally revise our beliefs, or perhaps should have revised them all along (the results of this study are not actually so surprising, given other work on the efficacy of health insurance).  For instance should we revise health care policy toward greater emphasis on catastrophic care, or how about toward public health measures, or maybe cash transfers?  (I would say all three.)  …

You are seeing obfuscations of reality when you encounter two particular responses to the new Medicaid results, which I have been seeing with disturbing frequency.  The first is something like “But you still buy health insurance, don’t you?”  The second is when the debate is steered into showing that Medicaid does indeed benefit poor people (which is obviously true, and was so before and after this study).

… A better response would run more along the lines of “The Medicaid expansion had been oversold, we now should think more along some other lines for improving our health care system.  Let’s admit that we have more of a mess on our hands than we had realized or let on.”  You don’t have to deny that Medicaid might help with long-term care problems, for instance, or advocate the abolition of Medicaid.

Read his post and follow the links for some very good discussion. Also this from the American Enterprise Institute.

Medicaid’s problems start with its flawed federal-state structure. The federal government imposes many restrictions on the states, and the states have strong incentives to maximize federal Medicaid payments. The result is a dysfunctional program. A better approach would free the states to manage the program within fixed amounts of federal support.

Several years ago we pointed out the benefits of federal block grants for Medicaid.

Here’s a particularly sharp criticism of the program.

In our state, Medicaid expansion is supported by both legislative majorities and the governor. It’s going to happen. But there must be a commitment to manage the program more efficiently and assure positive health care outcomes. The Oregon study offers an important cautionary warning.