What Paul Ryan Got Right: Medicaid’s Effect on Long-Term Care Insurance

7827259692_a274cc1cc4_c“Medicaid imposes an ‘implicit tax’ on beneficiaries.”  So stated a major report released last week by U.S. House Budget Committee Chairman Paul Ryan.  The report provides an overview of the complex patchwork of anti-poverty programs in the United States.  Unlike the uninformative sound bites that often pass for analysis inside the Beltway, this report is notable for its attempt to summarize part of the vast academic literature about the intended and unintended consequences of these programs.

Rather than launch a substantive discussion of whether there is a better way to help the least fortunate among us, many commentators were more interested in the small political firestorm created when Fiscal Times reporter Rob Garver wrote that Congressman Ryan had misrepresented several studies that were cited.  This claim was quickly sensationalized in the media and across the blogosphere (including the LA Times, New York magazine, Daily Kos, and MediaMatters, among many others), despite the fact that at least one of the claims of misrepresentation was incorrect, as reported by Charles Blahous in his e21 blog.  (Note: the Fiscal Times subsequently issued a corrected post).

The study in question – the one that Congressman Ryan got right despite the Fiscal Times claim to the contrary – was a paper I co-authored with Amy Finkelstein of MIT.  This paper, published in the 2008 American Economic Review, estimated that Medicaid could explain the lack of private insurance for about two-thirds to ninety percent of individuals, even if no other factors limited the market for insurance.  This despite the fact that long-term care expenditures constitute one of the largest financial risks facing the elderly in the United States and play a central role in determining the retirement security of elderly Americans. You can read the full news here.

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