Working Paper: NBER ID: w24267
Authors: Ethan M.J. Lieber; Lee M. Lockwood
Abstract: Making a transfer in kind reduces its value to recipients but can improve targeting. We develop an approach to quantifying this tradeoff 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: in-kind transfers; Medicaid; home care; targeting; moral hazard
JEL Codes: H21; H51; I13; I38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| formal care consumption (D19) | moral hazard cost (D61) |
| targeting benefit (L21) | welfare gains (D69) |
| in-kind provision (H42) | overconsumption (E21) |
| in-kind provision (H42) | targeting benefit (L21) |
| in-kind provision of home care (D13) | formal care consumption (D19) |