Behavioral Economics and Health Policy: Understanding Medicaid's Failure

66 Pages Posted: 9 Mar 2005


This Article employs a behavioral economic analysis to understand why Medicaid has failed to improve the health outcomes of its beneficiaries. It begins with a formal economic model of health care consumption and then systematically incorporates a survey of psychosocial variables to formulate explanations for persistent health disparities. This methodology suggests that consulting the literature in health psychology and intertemporal decision theory - empirical sources generally excluded from orthodox economic analysis - provides valuable material to explain certain findings in health econometrics. More significantly, the lessons from this behavioral economic approach generate useful policy considerations for Medicaid policymakers, who largely have neglected psychosocial variables in implementing a health insurance program that rests chiefly on orthodox economic assumptions.

The Article's chief contributions include an expansion of the behavioral economic approach to include a host of variables in health psychology, a behavioral refinement of empirical health economics, a behavioral critique of Medicaid policy, and a menu of suggested Medicaid reforms.

Keywords: Behavioral Economics, Health Economics, Health Care, Health Policy, Medicaid

JEL Classification: H51, I12, I18, I38, J24, Z13

Suggested Citation

Richman, Barak D., Behavioral Economics and Health Policy: Understanding Medicaid's Failure. Cornell Law Review, Vol. 90, No. 3, 2005, Duke Law School Legal Studies Paper No. 62, Available at SSRN:

Barak D. Richman (Contact Author)

Duke University, School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7244 (Phone)
919-613-7231 (Fax)

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