DOES PUBLIC INSURANCE CROWD OUT PRIVATE INSURANCE?

DOES PUBLIC INSURANCE CROWD OUT PRIVATE INSURANCE?

April 1995 | David M. Cutler Jonathan Gruber
This paper examines the impact of public health insurance eligibility on private health insurance coverage in the United States. The authors focus on the expansion of Medicaid eligibility for children and pregnant women between 1987 and 1992, which increased Medicaid coverage by 50% and 100%, respectively. They estimate that between 47% and 74% of the increase in Medicaid coverage was associated with a reduction in private insurance coverage. The reduction in private insurance is attributed to employees dropping employer-provided insurance, possibly due to employers contributing less for insurance or encouraging employees to do so. The paper also investigates the mechanisms through which this "crowding out" occurs, finding no evidence that employers choose not to offer health insurance as eligibility rises, but rather that employees are less likely to take up coverage when it is offered. The findings suggest that public expansions of health insurance can significantly reduce private coverage, potentially reducing the effectiveness of public programs in covering the population.This paper examines the impact of public health insurance eligibility on private health insurance coverage in the United States. The authors focus on the expansion of Medicaid eligibility for children and pregnant women between 1987 and 1992, which increased Medicaid coverage by 50% and 100%, respectively. They estimate that between 47% and 74% of the increase in Medicaid coverage was associated with a reduction in private insurance coverage. The reduction in private insurance is attributed to employees dropping employer-provided insurance, possibly due to employers contributing less for insurance or encouraging employees to do so. The paper also investigates the mechanisms through which this "crowding out" occurs, finding no evidence that employers choose not to offer health insurance as eligibility rises, but rather that employees are less likely to take up coverage when it is offered. The findings suggest that public expansions of health insurance can significantly reduce private coverage, potentially reducing the effectiveness of public programs in covering the population.
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