The Impact of Medicaid Coverage on Mental Health, Why Insurance Makes People Happier in OHIE: by Spending Less or by Spending More?

The Oregon Health Insurance Experiment (OHIE) offers a unique opportunity to examine the causal relationship between Medicaid coverage and happiness among low-income adults, using an experimental design. This study leverages data from comprehensive surveys conducted at 0 and 12 months post-treatment. Previous studies based on OHIE have shown that individuals receiving Medicaid exhibited a significant improvement in mental health compared to those who did not receive coverage. The primary objective is to explore how Medicaid coverage impacts happiness, specifically analyzing in which direction variations in healthcare spending significantly improve mental health: higher spending or lower spending after Medicaid. Utilizing instrumental variable (IV) regression, I conducted six separate regressions across subgroups categorized by expenditure levels and happiness ratings, and the results reveal distinct patterns. Enrolling in OHP has significantly decreased the probability of experiencing unhappiness, regardless of whether individuals had high or low medical spending. Additionally, it decreased the probability of being pretty happy and having high medical expenses, while increasing the probability among those with lower expenses. Concerning the probability of being very happy, the OHP only had a positive effect on being very happy and spending less, and its effect on those with high expenses was insignificant. These findings align with the benefit of Medicaid: alleviating financial burden, contributing to the well-being of distinct subgroups.