Targeting with In-Kind Transfers: Evidence from Medicaid Home Care

Area of Science:

• Health Economics
• Public Policy
• Social Welfare

Background:

• In-kind transfers can improve program targeting but may reduce recipient value.
• Recent policy reforms increasingly favor flexible benefits over in-kind provisions.
• Understanding the trade-off between targeting and transfer value is crucial for effective social policy.

Purpose of the Study:

• To develop and apply a method for quantifying the trade-off between transfer value and targeting in in-kind benefits.
• To analyze this trade-off specifically within the context of home care services.
• To evaluate the net impact of in-kind transfers compared to flexible benefits.

Main Methods:

• Utilized randomized experiments conducted by Medicaid.
• Developed a quantitative approach to assess the value reduction and targeting efficiency of in-kind transfers.
• Employed a standard economic model under various assumptions.

Main Results:

• In-kind home care transfers significantly decreased the value received by recipients.
• These transfers successfully targeted a small, specific group of eligible individuals who were sicker and had fewer informal caregivers.
• The study found that the benefits of improved targeting generally exceeded the costs associated with reduced transfer value.

Conclusions:

• The targeting advantages of in-kind transfers can outweigh their value-reduction costs.
• Recent policy shifts towards flexible benefits may incur significant costs by reducing targeting efficiency.
• Policymakers should carefully consider the trade-offs when designing social transfer programs.