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

Abstract

Many of the most important government programs make transfers in kind as opposed to in cash. Making transfers in kind has the obvious cost that recipients would at least weakly prefer cost-equivalent cash transfers. But making transfers in kind can have benefits as well, including better targeting transfers to desired recipients. In this paper, we exploit large-scale randomized experiments run by three state Medicaid programs to investigate this central tradeoff for in-kind provision. Despite the large distortion from the in-kind provision of formal home care, the benefit from better targeting transfers to high-marginal utility types appears to be even greater. This highlights an important cost of recent policy reforms toward more flexible, cash-like benefits.