Does Health Insurance Reduce Consumption Risk? Evidence from Medicaid Expansions

Abstract

We assess the consumption insurance value of Medicaid expansions. While Medicaid expansions improve physical and financial health, they may not smooth consumption risk because a great deal of uninsured medical spending is financed with bad debt and charity care. Using multiple econometric methods, we find only small effects of Medicaid expansion throughout the consumption distribution. Our estimates, combined with an assumed utility function, imply near-zero insurance value to the uninsured from Medicaid expansion. While our estimates are statistically noisy, we can nevertheless rule out the hypothesis that a large share of Medicaid's value comes from reductions in consumption risk.

Keywords: Medicaid expansion, insurance, quantile difference-in-differences, changes-in-changes, risk premium