How expansion of state insurance can harm some children

Gruber and his colleagues at NBER found that for every 100 children who start receiving public health insurance about 60 lose their private insurance. They write about this new form of "crowding out" in their newest paper, published as an NBER working paper. The question then arises on how advocates of expanding state insurance can ensure that families affected are compensated for this welfare loss. Here is the abstract of their new paper:
he continued interest in public insurance expansions as a means of covering the uninsured highlights the importance of estimates of "crowd-out", or the extent to which such expansions reduce private insurance coverage. Ten years ago, Cutler and Gruber (1996) suggested that such crowd-out might be quite large, but much subsequent research has questioned this conclusion. We revisit this issue by using improved data and incorporating the research approaches that have led to varying estimates. We focus in particular on the public insurance expansions of the 1996-2002 period. Our results clearly show that crowd-out is significant; the central tendency in our results is a crowd-out rate of about 60%. This finding emerges most strongly when we consider family-level measures of public insurance eligibility. We also find that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance.

The paper can be accessed on the NBER website here.