The Role of Substitutes in Policy Analysis: Acute Care Services in State Medicaid Programs

Using four acute care equations (inpatient, physician, outpatient, and clinic) from a larger model of Medicaid, this research examines the “contents” of policy outcomes. This closer examination of outcomes brings to light the interactions between redistributive programs and services and the role of substitutes and complements in state-level policy analysis. (A substitute is a benefit or service that can be used instead of another to produce a similar outcome; a complement is a benefit or service that is likely to result in the use of another benefit or service.) Support is found for the inclusion of these theoretical constructs in policy analysis. Regarding Medicaid, the author concludes that physician, outpatient, and clinic services all complement hospital services; that physician and outpatient services substitute for one another; that state AFDC and SSI policy decisions have a greater impact on utilization than Medicaid-specific eligibility and service decisions do; and that the factors driving utilization (supply, demand, etc.) vary dramatically across acute care settings. The implications for Medicaid policymaking are also discussed.