Would the Poor Prefer Cash Instead of Medicaid?

Medicaid is the nation's largest means-tested transfer program, and even conservatives generally acknowledge that it makes its recipients better off. It's hard not to make people better off when you're giving them something for free that they would otherwise have to pay for. At the very least, those people now have more money in their pocket that they can use to pay for something else.

The question still remains: How much better off? What, in other words, is the value of the transfer to the people who are getting health care through Medicaid? In a new paper, Amy Finkelstein, Nathaniel Hendren and Erzo F.P. Luttmer note that the Congressional Budget Office values the transfer at the amount of money the government is spending on Medicaid. But of course, the value to recipients of any "in kind" benefit has only a weak relationship to the actual amount of money spent. If I give you a Doberman pinscher and $3,000 worth of shampoo samples marked "not for resale," I have certainly transferred something with value, but most people would probably not pay $3,000-plus for it, even if they had the money.