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Adverse Selection in Medicaid: Evidence from Discontinuous Program Rules

Betsy Q. Cliff, Sarah Miller, Jeffrey T. Kullgren, John Z. Ayanian and Richard Hirth

No 28762, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent expansions of Medicaid eligibility have come with increased experimentation with enrollee cost-sharing. In this paper, we exploit a discontinuous premium increase at the federal poverty level in Michigan’s Medicaid expansion program to test low-income individuals’ sensitivity to premiums using linked enrollment and claims data. At the cutoff, average premiums increase by $3.15 and the probability of disenrollment increases by 2.3 percentage points. Increased disenrollment occurs among those with fewer documented medical needs at baseline, but not among those with greater medical needs. These results suggest healthier low-income individuals may be sensitive to even modest health insurance premiums, and that premiums may induce adverse selection in Medicaid plans.

JEL-codes: I1 I12 I13 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-hea and nep-ias
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Published as Betsy Q. Cliff & Sarah Miller & Jeffrey T. Kullgren & John Z. Ayanian & Richard A. Hirth, 2022. "Adverse Selection in Medicaid," American Journal of Health Economics, vol 8(1), pages 127-150.

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