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The impact of expanding Medicaid on health insurance coverage and labor market outcomes

Abstract

Expansions of public health insurance have the potential to reduce the uninsured rate, but also to reduce coverage through employer-sponsored insurance (ESI), reduce labor supply, and increase job mobility. In January 2014, twenty-five states expanded Medicaid as part of the Affordable Care Act to low-income parents and childless adults. Using data from the 2011–2015 March Current Population Survey Supplements, we compare the changes in insurance coverage and labor market outcomes over time of adults in states that expanded Medicaid and in states that did not. Our estimates suggest that the recent expansion significantly increased Medicaid coverage with little decrease in ESI. Overall, the expansion did not impact labor market outcomes, including labor force participation, employment, and hours worked.

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Notes

  1. 1.

    Some states provided Medicaid to childless adults under Section 1115 Medicaid wavier demonstration authority; however, the expansions under this waiver program offer more limited benefit coverage, have enrollment caps, and can have county-specific coverage. According to Smith et al. (2013), 9 states provided limited Medicaid to childless adults before January 2014: AZ, CO, CT, DE, DC, HI, MN, NY, and VT.

  2. 2.

    The District of Columbia and Minnesota set the eligibility threshold above 138% of the federal poverty guidelines for both childless adults and adults with dependent children, while Conneticut set the eligibility threshold above 138% only for adults with dependent children.

  3. 3.

    Sixteen states and the District of Columbia are operating their own exchanges, while the federal government established the exchanges for 27 states. In seven states, both federal and state are running the exchanges. To be eligible to enroll in health coverage through the Marketplace, individuals must live in the United States, be a U.S. citizen or U.S. national, and not be incarcerated.

  4. 4.

    Also related to this literature, Burns and Dague (2017) examine the effects of Medicaid expansion on Supplemental Security Income (SSI) participation for low-income childless adults who are elgible for Medicaid. Hall et al. (2017) examine the effects of Medicaid expansion on the labor supply of adults who have disabilities and qualify for SSI.

  5. 5.

    There were concerns among policymakers, which were also described in industry reports, that the ACA would crowd out ESI because of Medicaid expansion (e.g., Herrick and Gorman 2013; Nowak et al. 2016).

  6. 6.

    Only Connecticut used the new state plan option.

  7. 7.

    The text of the ACA expands Medicaid to 133% of federal poverty guidelines, but the new method of calculating income, modified adjusted gross income (MAGI), increases the eligibility threshold to 138%. Because eligibility for premium credits through the exchanges is based on income tax rules for counting income and family size, the tax-filing unit became the basis for family structure calculations. Thus, the ACA establishes a new definition of income, MAGI, which is the sum of adjusted gross income, non-taxable Social Security benefits, tax-exempt interest, and foreign earned income and housing expenses for Americans living abroad (Center for Labor Research and Education 2014).

  8. 8.

    The expansion of Medicaid is also likely to reduce the proportion of labor market opportunities at which an individual would be ineligible for Medicaid and not receive the opportunity to purchase ESI.

  9. 9.

    Additionally, employees may decrease their hours or not increase their hours in order to keep their income below the threshold and remain eligible for Medicaid.

  10. 10.

    Although the expansion of Medicaid could lead to welfare-enhancing job switches as workers move to more productive jobs because Medicaid is now available to the worker at both the current and the new job (Rosen 1986; Gruber 2000), we are not able to examine job changes using the March CPS data. In additional analysis based on the basic monthly CPS data, we find that the expansion of Mediciad did not influence job changes.

  11. 11.

    A related literature examines the relationship between Medicaid and Supplement Security Income (SSI) program participation and the labor market impacts for SSI participants due to the expansion of Medicaid. Prior to the ACA, low-income adults without dependent children were only eligible for Medicaid if they also received SSI Burns and Dague (2017) find that the expansion of Medicaid, through the ACA, reduced SSI participation, since SSI has a more intensive review process to receive benefits. Hall et al. (2017) find that adults with disabilities, who qualify for SSI, are more likely to be employed in states that expanded Medicaid than in states that did not, which could be due to the relatively higher income-eligibility thresholds for Medicaid compared to SSI

  12. 12.

    Although the authors do not directly estimate the impact on labor market outcomes, Gravelle and Lowry (2016) estimate the social welfare effects for the major individual provisions of the ACA while incorporating changes in labor supply. The authors suggest that, even if the effects of the ACA on labor supply are small, the ACA is likely to increase welfare because of broader risk sharing and eliminating the distortions in labor supply and job choices from ESI.

  13. 13.

    The March CPS data include the family income to poverty ratio in bracketed groups: [0–50%], (50–100%], (100–150%], etc. As a result, we calculate a continuous measure using family income, family size, and the appropriate poverty guideline for that family size.

  14. 14.

    Since the expansion of Medicaid occurred in January 2014 for most states, constructing health insurance variables in this manner may lead to an underestimate of the impact of Medicaid expansion on Medicaid participation and crowd-out. To examine the robustness of our main results, we exclude respondents from March 2014 who completed the traditional questionnaire. These individuals may have been reporting their health insurance coverage status for March 2014 instead of 2013. These results are similar to the main results.

  15. 15.

    As a result of the potential for the redesigned questionnaire to influence the estimates, we also examine the impact of the Medicaid expansion on health insurance coverage using data from the American Community Survey. As shown in Appendix Table A3 (ESM), these results are similar to the results shown in Table 2 using the March CPS. As a result, given our focus on the labor market outcomes in the CPS data, we present the health insurance results also using the CPS data in the main tables.

  16. 16.

    The results reported below are robust to excluding these demographic characteristics.

  17. 17.

    As a result of the focus on individuals with income below 100% of the federal poverty guidelines in order to contrast Medicaid eligibility with not being eligible for Medicaid or federal subsidies and to minimize measurement error, these results below may not generalize to the population with income between 100 and 138% of the federal poverty guidelines.

  18. 18.

    Thus, we initially exclude residents of Michigan (which expanded on 4/1/2014), New Hampshire (8/15/2014), Pennsylvania (1/1/2015), and Indiana (2/1/2015). We also exclude residents of Wisconsin, which decided not to expand Medicaid, but has an income eligibility threshold for childless adults of 100%. As a result, for childless adults, we compare the changes in states that expanded Medicaid to a threshold of 138% of the poverty guidelines on January 1, 2014 to the changes in states that continue to not provide Medicaid to childless adults. Alaska and Montana expanded Medicaid in September 2015 and January 2016, respectively, which we treat as not expanding Medicaid for our analysis because our sample ends in March 2015.

  19. 19.

    Beginning in 2011, some, but not all, counties in California expanded Medicaid. Thus, we treat California as not expanding Medicaid until January 2014, when the state expanded coverage. The results reported below are robust to excluding California from the sample.

  20. 20.

    An alternative research design would be to compare the changes before and after January 1, 2014 in states that did expand Medicaid and states that did not for income-eligible and income-ineligible adults using a difference-in-difference-in-differences framework. However, as mentioned above, measurement error could result from income volatility leading many individuals above the eligibility thresholds based on March data to report receiving Medicaid at some point during the prior year. Additionally, measurement error is more common among individuals with higher income (Davern et al. 2009). To minimize concerns related to measurement error and income volatility, we focus on individuals with low levels of education and also examine individuals with income below 100% and estimate a difference-in-differences specification.

  21. 21.

    Prior to expanding Medicaid, states utilized different eligibility thresholds for jobless and working adults, with the eligibility thresholds generally higher for working adults. We focus on the threshold for jobless adults since we are interested in the influence of changes in these thresholds on labor force participation and other labor market outcomes.

  22. 22.

    We use the actual thresholds for Medicaid eligibility in all years, which will account for the states that provided coverage to childless adults before the expansion. However, some of the early expansion states only provided coverage to subgroups of childless adults or to specific counties. In this case, using Medicaid eligibility levels for those states will underestimate the effect of the expansion. Thus, we include the variables that measures whether the states provided coverage prior to the ACA.

  23. 23.

    In the appendix, we provide additional evidence that supports the identifying assumption that the pre-expansion trends in labor market outcomes are similar between expansion and non-expansion states. First, Appendix Table A10 (ESM) displays regression estimates using a placebo date of the expansion of Medicaid, where each state’s eligibility threshold is constructed by assuming that Medicaid expanded one year earlier. For all three samples and both demographic groups, the estimates are small in magnitude and not statistically significant. Second, using the basic monthly CPS with the higher frequency of observations, Appendix Figs. 1 and 2 (ESM) show show the pre-expansion trends in labor market outcomes for states that expanded Medicaid relative to states that did not. Based on an event study specification, in the figures, the confidence intervals for the estimates prior to expansion almost always include zero and the pre-expansion trends are near zero and approximately parallel, which is consistent with our identifying assumption. Appendix Table A11 (ESM) displays the corresponding estimates and falsification test results using the basic monthly CPS data.

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Correspondence to Younsoo Jung.

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The authors thank Tom DeLeire and participants at the American Society for Health Economics conference for helpful comments.

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Frisvold, D.E., Jung, Y. The impact of expanding Medicaid on health insurance coverage and labor market outcomes. Int J Health Econ Manag. 18, 99–121 (2018). https://doi.org/10.1007/s10754-017-9226-8

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Keywords

  • Medicaid
  • Labor supply
  • Health insurance
  • Employment

JEL Classification

  • I13
  • J22
  • I18