Targeting with In-Kind Transfers: Evidence from Medicaid Home Care
Ethan M. J. Lieber, Lee M. Lockwood
American Economic Review · 2019 · Volume 109 · Issue 4
Abstract
Making a transfer in kind reduces its value to recipients but can improve targeting. We develop an approach to quantifying this trade-off and apply it to home care. Using randomized experiments by Medicaid, we find that in-kind provision significantly reduces the value of the transfer to recipients while targeting a small fraction of the eligible population that is sicker and has fewer informal caregivers than the average eligible. Under a wide range of assumptions within a standard model, the targeting benefit exceeds the distortion cost. This highlights an important cost of recent reforms toward more flexible benefits.
Keywords
Asymmetric and Private Information, Mechanism Design, National Government Expenditures and Health, State and Local Government: Health, Education, Welfare, Public Pensions, Health: Government Policy, Regulation, Public Health, Well-Being, and Poverty: Government Programs, Provision and Effects of Welfare Programs
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