The State of Healthcare

Former Bush economist discusses research, policy

Katherine Baicker

Health economist Katherine Baicker discusses evaluating Oregon's Medicaid experiment and implications for the ACA with IPR Director David Figlio.

At a time when healthcare has been high on the public’s radar, more than 90 people turned out to hear Harvard’s Katherine Baicker, a former economic adviser to President George W. Bush, discuss the topic as IPR’s Fall 2013 Distinguished Public Policy Lecturer.

The Oregon Experiment

IPR Director and event moderator David Figlio began by asking Baicker about the “whiplash” that he experienced when listening to media coverage about the first findings from Oregon's Medicaid experiment, the evaluation of which Baicker co-led, and what these results might indicate about the Affordable Care Act (ACA).

The Oregon Health Insurance Experiment is the first randomized controlled evaluation of Medicaid in the United States, and Baicker and her colleagues got in at the ground level to design the study after hearing about the state’s Medicaid lottery on the news. The state used this lottery to select low-income, uninsured adults from a waiting list for Medicaid in 2008.

The researchers published findings in 2011 and 2013, yet no matter how carefully they spoke to the press about them, the media coverage was “easily pushed to being all black or all white,” Baicker said. “I read a lot of headlines about the same paper that sounded as though they were discussing two completely different sets of results.”

Katherine Baicker
Katherine Baicker meets with IPR graduate research assistants.

The consequences of expanding Medicaid—or any other health insurance program—she pointed out, are likely “neither all good, nor all bad.”

The Oregon study revealed that participants used more healthcare, including hospitals, doctors, and prescriptions. Enrollees were better off financially: They were 25 percent less likely to have an unpaid medical bill sent to a collection agency than the control group, and the likelihood of having catastrophic out-of-pocket medical costs “virtually disappeared.” Health outcomes were mixed. Baicker pointed to enrollees’ “dramatically” better mental health outcomes, a “major, underappreciated” health burden for this low-income population, with Medicaid reducing observed depression rates by 30 percent. But their physical health outcomes, such as the prevalence of diabetes and high blood pressure, did not measurably improve.

Many people focus exclusively on “physical health outcomes,” Baicker said. Since the program did not “cure diabetes” or result in other detectable physical health improvements after two years—though long-term effects could be different—some might ask, “Why shouldn’t we take the thousands and thousands of dollars spent on Medicaid and spend them on some other program?”

“The bottom line is that Medicaid is a program with real costs … and major benefits,” Baicker said, urging policymakers to use the evidence and weigh both.  

Effects of the Affordable Care Act

Baicker then discussed what she sees as the ACA’s two major goals: covering the uninsured and controlling spending growth. The first is much easier to accomplish because we already know what to do, she said.

Cecilia Rouse
To the more than 90 in attendance, Katherine Baicker recounts
her time as an
economic adviser to President Bush and her work
on healthcare issues.

“If you spend enough money, you can cover most of the uninsured,” Baicker said, pointing to good data about what different policies would do. “The second goal of getting spending under control is the much thornier one, in part because we don’t know the right policy on that front.”

Many studies have shown that both patients and providers are price sensitive, Baicker said. Changing incentives for patients is an important part of the solution, but alone it will not be enough to eliminate low-value care because patients are human beings making tough decisions with limited information.

Incentives for providers must also be improved. “It is clear that the payment system on the provider side has driven a lot of inefficient spending,” Baicker said. Evidence on how to improve provider payments is limited though, partly because it is harder to design studies around system-level reforms. In this respect, she sees a lot of “throwing darts” in the ACA in the hope that something will stick and work.

Baicker also spoke about the effort and rewards inherent in working with states to evaluate large-scale reforms—and the likelihood of missed evaluation opportunities as the ACA rolls out.

She and her colleagues continue to examine the Oregon data and are now investigating emergency department use. In detailing some of their methodological challenges, Baicker thanked IPR anthropologist Thomas McDade, who directs IPR’s Cells to Society (C2S): The Center on Social Disparities and Health, for his help in teaching them how to use dried blood spots. McDade helped to pioneer this method that allows researchers to test for a wide range of health indicators using blood from finger pricks.

Research and Policymaking

In 2005, Baicker took a two-year leave to serve as one of the three Senate-confirmed economists on the Council of Economic Advisers (CEA) under President George W. Bush. At the CEA, she worked on the microeconomics portfolio and wound up spending half of her time on healthcare issues.

“The CEA was like a small think thank within the Executive Office of the President, intended to bridge academic research and policy,” she said.

She also noted that the CEA was “nimbler” than many other agencies or departments. Since the economists were only there for two years, they were much less wedded to the “established ways of doing things.”

She said her training as an economist taught her how to quickly dissect and analyze a wide range of issues. In terms of actual decision making, she learned how to give the very best advice she could and then stand back and accept the decision taken.

“I’m very excited about moving some very influential person’s opinion by an inch versus moving people that I talk to all the time by a foot,” Baicker said.

Katherine Baicker is a professor of health economics in Harvard University’s School of Public Health and co-principal investigator of the Oregon Health Insurance Experiment. David Figlio is IPR director and Orrington Lunt Professor of Education and Social Policy. Thomas McDade is professor of anthropology, director of IPR's Cells to Society (C2S): The Center on Social Disparities and Health, and an IPR fellow.

IPR Distinguished Public Policy Lecturers are prominent individuals who straddle the worlds of policymaking and academia and can speak on the use of research in policymaking. A list of past lecturers can be found here

Photos: Jim Ziv