Does public insurance coverage for pregnant women affect prenatal health behaviors?

Abstract

Despite plausible mechanisms, little research has evaluated potential changes in health behaviors in response to expansions in public insurance coverage of the 1980s and 1990s targeted at low-income families. In this paper, we provide the first national study of the effects of Medicaid expansions on health behaviors for pregnant women, which is a group of particular interest given evidence of the importance of prenatal health to later life outcomes. In doing so, we also add to the sparse literature on ex ante moral hazard, which is nearly always mentioned as a theoretical consequence of health insurance, though relatively few empirical studies have assessed its importance. We exploit exogenous variation from the Medicaid income eligibility expansions for pregnant women during late-1980s through mid-1990s to examine the effects of these policy changes on smoking, weight gain, and other maternal health indicators. We find that the 13 percentage point increase in Medicaid eligibility during the study period was associated with approximately a 3% increase in smoking and a small increase in pregnancy weight gain for most of the sample. The increase in smoking, which is a significant cause of poor infant health, may partly explain why Medicaid expansions have not been associated with substantial improvement in infant health.

Appendix: Theoretical model

The summary of the theoretical predictions provided in the text are derived from the following model. In this model, mothers care about consumption, leisure, and child health. There are two periods that span the pre- to post-birth period.³¹ In this model, child health in the post-birth period is uncertain. With probability (π), the child may experience an adverse health shock (z) that lowers child health and can be offset (repaired) with medical care (m₁). Medical care in the first period can also be used to alter the probability of an adverse health event in period two.³² First-period maternal consumption, for example, nutrition and smoking, may also affect the probability of an adverse health shock in period two. Health insurance is particularly important because it is used to buy medical care after the birth in the case of an adverse outcome.

A woman’s expected utility is described by:

$$ E(U)={u}_0\left({x}_0,{l}_0\right)+\beta \left\{\left[1-\pi \left({m}_0,{x}_0\right)\right]\left[{u}_1\left({x}_1,{l}_1,c\right)\right]+\pi \left({m}_0,{x}_0\right)\left[{u}_1\left({x}_1,{l}_1,c-z\left({m}_1\right)\right)\right]\right\} $$

(3)

Equation (3) reflects the fact that there are two periods: prior to birth (t = 0) and after birth (t = 1). Utility is a function of consumption (x), leisure (l), and child health (c) in each period, although in period 0 the child is not born and so child health does not enter the utility function.³³ The discount rate is denoted by (β).

The woman’s budget constraint is given by:

$$ {x}_0+{p}_m{m}_0+\frac{x_1}{1+r}+\pi \left({m}_0\right)\frac{p_m\left(\alpha \right){m}_1}{1+r}+\frac{f}{\alpha}\frac{1}{1+r}=w\left(\alpha \right)\left(1-{l}_0\right)+\frac{w\left(\alpha \right)\left(1-{l}_1\right)}{1+r}=W $$

(4)

Lifetime income is spent on: consumption (x) in periods 0 and 1; medical care (m) in periods 0 and 1 with price of medical care denoted by p_m; and the quantity of health insurance (α) in period one. The interest rate is denoted by (r). Health insurance reduces the price of medical care and is financed out of earnings (w). The cost of health insurance also includes a loading charge (f/α) where f is a fixed cost of administering health insurance.

The constrained choice problem is given by:

$$ {\displaystyle \begin{array}{l}L={u}_0\left({x}_0,{l}_0\right)+\beta \left\{\left[1-\pi \left({m}_0,{x}_0\right)\right]\left[{u}_1\left({x}_1,{l}_1,c\right)\right]+\pi \left({m}_0,{x}_0\right)\left[{u}_1\left({x}_1,{l}_1,c-z\left({m}_1\right)\right)\right]\right\}\\ {}\kern0.84em -\lambda \left[{x}_0+{p}_m{m}_0+\frac{x_1}{1+r}+\pi \left({m}_0\right)\frac{p_m\left(\alpha \right){m}_1}{1+r}+\frac{f}{\alpha}\frac{1}{1+r}-w\left(1-{l}_0\right)-\frac{w\left(\alpha \right)\left(1-{l}_1\right)}{1+r}\right]\end{array}} $$

(5)

The first-order condition for consumption (health behavior) in the first period is given by:

$$ {\displaystyle \begin{array}{l}\frac{\partial L}{\partial {x}_0}={U}_{x0}-\beta \frac{\partial \pi }{\partial {x}_0}\left({\tilde{u}}_1-{u}_1\right)-\lambda \left[1+\frac{\partial \pi }{\partial {x}_0}\frac{p_m\left(\alpha \right){m}_1}{1+r}\right]=0\\ {}{U}_{x0}=\beta \frac{\partial \pi }{\partial {x}_0}\left({\tilde{u}}_1-{u}_1\right)+\lambda \left[1+\frac{\partial \pi }{\partial {x}_0}\frac{p_m\left(\alpha \right){m}_1}{1+r}\right]\end{array}} $$

(6)

Equation (6) is the usual equilibrium condition. The left-hand side is the benefit of first period consumption and the right hand side is the cost, which includes the higher probability of lower second period utility because of an adverse health shock to child caused by first period consumption and the greater spending on second period medical care due to a higher probability of an adverse health shock $\Big({\tilde{u}}_1$ denotes period 1 utility if sick).³⁴

Equation (6) also illustrates the problem of ex ante moral hazard. Health insurance (α) lowers the price of medical care, and a lower price of medical care reduces the cost of first period consumption that is related to the probability of a child health shock. The first-order conditions for medical care are:

$$ {\displaystyle \begin{array}{l}\frac{\partial L}{\partial {m}_0}=\beta \frac{\partial \pi }{\partial {m}_0}\left({\tilde{u}}_1-{u}_1\right)-\lambda \left[{p}_m\left(\alpha \right)+\frac{\partial \pi }{\partial {m}_0}\frac{p_m\left(\alpha \right){m}_1}{1+r}\right]=0\\ {}\beta \frac{\partial \pi }{\partial {m}_0}\left({\tilde{u}}_1-{u}_1\right)=\lambda \left[{p}_m\left(\alpha \right)+\frac{\partial \pi }{\partial {m}_0}\frac{p_m\left(\alpha \right){m}_1}{1+r}\right]\\ {}\\ {}\frac{\partial L}{\partial {m}_1}=-\beta \pi \frac{\partial {u}_1}{\partial c}\frac{\partial z}{\partial {m}_1}-\lambda \pi \frac{p_m\left(\alpha \right)}{1+r}=0\\ {}-\beta \pi \frac{\partial {u}_1}{\partial c}\frac{\partial z}{\partial {m}_1}=\lambda \pi \frac{p_m\left(\alpha \right)}{1+r}\end{array}} $$

(7)

First-period medical care is valued because it reduces the probability of an adverse event and raises expected utility in the second period (${\tilde{u}}_1$ denotes period 1 utility if sick). A lower probability of an adverse event also reduces second-period medical expenditures. Both of these marginal benefits are equated to the price of medical care. Second-period medical care raises utility by improving child health and this marginal benefit is equated to the price of medical care.

The first-order condition for health insurance is:

$$ {\displaystyle \begin{array}{l}\frac{\partial L}{\partial \alpha }=-\lambda \left[\pi \frac{\partial {p}_m}{\partial \alpha}\frac{m_1}{1+r}-\frac{f}{\alpha^2}\frac{1}{1+r}-\frac{\partial w}{\partial \alpha}\frac{\left(1-{l}_1\right)}{1+r}\right]=0\\ {}-\pi \frac{\partial {p}_m}{\partial \alpha}\frac{m_1}{1+r}=\frac{f}{\alpha^2}\frac{1}{1+r}-\frac{\partial w}{\partial \alpha}\frac{\left(1-{l}_1\right)}{1+r}\end{array}} $$

(8)

According to (8), a woman chooses insurance to equate the expected medical expenditures to the cost of insurance, which is the wage offset plus loading cost. Again, the expansion of Medicaid makes insurance free and there is an income effect associated with this change. The income effect may also be driven by Medicaid-induced shifts in labor supply.

Table 7 Estimates of effects of Medicaid eligibility for pregnant women on health behaviors. Mothers 18–39, high school educated or below. Comparison of estimates from different model specifications

Table 8 Estimates of the effect of Medicaid eligibility on smoking and weight gain. Sensitivity of estimates to inclusion/exclusion of maternal characteristics

Table 9 Estimates of the effect of Medicaid eligibility on smoking and weight gain by parity