Targeting with In-Kind Transfers: Evidence from Medicaid Home Care

74 Pages Posted: 20 Jun 2017 Last revised: 2 Feb 2018

See all articles by Ethan Lieber

Ethan Lieber

University of Notre Dame

Lee Lockwood

University of Virginia - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 23, 2018

Abstract

Many of the most important government programs make transfers in kind as opposed to in cash. Making transfers in kind has the obvious cost that recipients would often prefer cost-equivalent cash transfers. But making transfers in kind can have benefits as well, including better targeting transfers to desired recipients or states of the world. In this paper, we develop a framework for evaluating this tradeoff and apply it to home care. Exploiting large-scale randomized experiments run by three state Medicaid programs, we find that in-kind provision of formal home care significantly reduces the value of benefits to recipients while targeting benefits to a small fraction of the eligible population that has greater demand for formal home care, is sicker, and has worse informal care options than the average eligible. Under a wide range of assumptions within a standard model, the targeting benefit of in-kind provision exceeds the distortion cost. This highlights an important cost of recent reforms that move toward more flexible, cash-like benefits.

Keywords: cash vs. in-kind, insurance, long-term care

JEL Classification: I13, H21, I38, H51

Suggested Citation

Lieber, Ethan and Lockwood, Lee, Targeting with In-Kind Transfers: Evidence from Medicaid Home Care (January 23, 2018). Michigan Retirement Research Center Research Paper No. 2017-359, Available at SSRN: https://ssrn.com/abstract=2989019 or http://dx.doi.org/10.2139/ssrn.2989019

Ethan Lieber

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Lee Lockwood (Contact Author)

University of Virginia - Department of Economics ( email )

237 Monroe Hall
P.O. Box 400182
Charlottesville, VA 22904-418
United States

HOME PAGE: http://leemlockwood.com

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