Does Public Insurance Crowd Out Private Insurance?

48 Pages Posted: 16 Aug 2000 Last revised: 12 Jun 2010

See all articles by David M. Cutler

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 1995

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

Cutler, David M. and Gruber, Jonathan, Does Public Insurance Crowd Out Private Insurance? (April 1995). NBER Working Paper No. w5082. Available at SSRN: https://ssrn.com/abstract=225860

David M. Cutler (Contact Author)

Harvard University - Department of Economics ( email )

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Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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