By using a lottery to assign coverage, Oregon had unintentionally created the perfect conditions for a randomized controlled trial that could reveal the true costs and benefits of health insurance. Since the population that received coverage was statistically equivalent to the group that didn’t, economists could simply compare outcomes between groups to gauge the effects of insurance. “Remarkably, this had never been done before in the United States,” says Finkelstein, who won the 2012 John Bates Clark Medal from the American Economic Association for most significant contribution to economic thought by an economist under 40.
The results were stunning. Researchers found, for example, that Medicaid increased health care use and reduced rates of depression, despite often-heard claims that Medicaid coverage was worthless. Medicaid also increased visits to the emergency room — notwithstanding many policymakers’ predictions to the contrary. “The beauty and power of randomized evaluations is that they really allow you to be surprised,” Finkelstein says.
The study also showed that health insurance successfully provides a financial safety net. “People often think of health insurance as a way of improving health, but to economists, health insurance is a financial instrument. The first idea is not to improve health but to protect you financially against large medical expenses,” Finkelstein says. “We found Medicaid basically eliminates the prospect that a person will have a catastrophic financial issue.”
The results from the Oregon Health Insurance Experiment made headlines again and again, underscoring for Finkelstein the power that randomized evaluations have to change both public perception and policy debate. “Nobody is arguing about what the results are,” Finkelstein says. Instead, they’re arguing about what to do with this new information — and that is the way of the future.
