NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effects of Expanded Medicaid Coverage

Expanding Medicaid in Oregon did not affect beneficiaries' employment or earnings.

Most studies of Medicaid focus on the effects of the program on health expenditures or health outcomes. In The Impact of Medicaid on Labor Force Activity and Program Participation: Evidence from the Oregon Health Insurance Experiment (NBER Working Paper No. 19547), authors Katherine Baicker, Amy Finkelstein, Jae Song, and Sarah Taubman consider a set of additional effects. They focus on how Medicaid coverage affects enrollees' labor market activity and their take-up of government benefits such as disability insurance and welfare. The authors build on an ongoing study of a 2008 policy change in Oregon in which the state initiated a limited expansion of its Medicaid program for low-income, uninsured adults, drawing approximately 30,000 names by lottery from a waiting list of 90,000. Those selected won the chance to apply for Medicaid and to be covered if they met eligibility requirements. The lottery increased enrollment in Medicaid by about 25 percent, with virtually no impact on the coverage rate for private insurance.

The authors note that the income ceiling for Medicaid eligibility may discourage employment and earnings, and that Medicaid insurance coverage itself may reduce the beneficiaries' incentive to seek employment as a way to obtain health insurance. If access to Medicaid reduces beneficiaries' earnings, this could in turn increase eligibility for, and hence participation in, other means-tested programs. It is also possible that participation in Medicaid may increase participation in other government programs by increasing awareness of these programs or by reducing the transaction costs of applying. These possibilities have raised concern that expanding Medicaid would reduce earnings and tax revenues, while contributing to additional increases in government spending.

By exploiting the random nature of increased access to Medicaid in Oregon, this study is able to provide evidence on the effect of program access that avoids many of the usual concerns about non-random selection into government programs. The results suggest that expanded Medicaid coverage in Oregon did not affect beneficiaries' employment or earnings over the first one to two years. The authors note that their results are subject to a margin of error, but they are precise enough to rule out either positive or negative employment effects of more than a few percentage points. The authors also find that Medicaid coverage increases the probability that a household receives food stamps. They find no substantial effects on the use of a range of other government programs including Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI).

These are the latest results from the Oregon Health Insurance Project which uses the random assignment associated with the eligibility lottery to study the impact of covering low-income, uninsured adults with Medicaid. Other key findings from the first one to two years of Medicaid coverage include: 1) Medicaid coverage increases health care use including emergency department visits, hospital admissions, outpatient visits, prescription drugs, and preventive care, as well as self-reported access to care; 2) Medicaid reduces exposure to financial risk, including the probability of having unpaid medical bills sent to collection agencies, and virtually eliminates the risk of catastrophic out-of-pocket medical expenditures; and 3) Medicaid improves some measures of health, specifically self-reported health, and reduces rates of depression but has no statistically significant effect on measured physical health outcomes such as blood pressure or cholesterol levels. More detail on these and other findings can be found on the study's website (www.nber.org/oregon).

--Les Picker

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