The two essays included in this dissertation investigate issues related to the crowd-out of private health insurance resulting from Medicaid expansions among the working age disabled. The first essay estimates the take-up and crowd-out rates that resulted from Medicaid expansions that began in the late 1990s among working age individuals with disabilities. Disabled individuals under 65 years old account for 15% of Medicaid recipients but half of all Medicaid spending. Despite their large cost, few studies have investigated the effects of Medicaid expansions for disabled individuals on insurance coverage and crowd-out of private insurance. Using an eligibility expansion that allowed states to provide Medicaid to disabled individuals with incomes less than 100% of the federal poverty level, I address these issues. Crowd-out estimates range from 49% using an ordinary least squares procedure to 100% using two-stage least-squares analysis.
The second essay evaluates how hospitals set their prices in response to a potential revenue reduction that results from the crowd-out measured in Essay 1. Medicaid reimburses health care providers for medical services at a lower rate than any other type of insurance coverage. To make up for the burden of treating Medicaid patients, providers claim that they must raise the rates of individuals covered by private insurance — a phenomenon referred to as cost-shifting. The current literature attempting to identify and measure the degree of cost shifting in the US health care market has produced mixed results. In Essay 2, I examine cost-shifting with a new identification strategy where I exploit the Medicaid expansion for the disabled from Essay 1 where for every new Medicaid enrollee another individual dropped private coverage, creating an opportunity for significant cost-shifting. Using the Healthcare Cost and Utilization Project’s Nationwide Inpatient Sample, I first replicate previous findings from the March Current Population Survey and the Survey of Income and Program Participation and demonstrate that there is 100 percent crowd-out from these particular Medicaid expansions. Next, I find that hospitals reduce the charge rates of the privately insured, a result that suggests that hospitals are not employing cost-shifting strategies as they claim.