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Does medicaid generosity affect household income?
Journal article   Peer reviewed

Does medicaid generosity affect household income?

Anil Kumar
Economic modelling, Vol.92, pp.239-256
11/01/2020
DOI: 10.1016/j.econmod.2020.01.004

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Abstract

Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)-induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states and are potentially subject to biases due to policy endogeneity. Using a Regression Kink Design (RKD) framework, this paper takes a new approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from 1980 to 2013 suggest that generous federal funding of state-level Medicaid costs have a negative effect on household income. The negative impact of Medicaid generosity on household income is more pronounced at the lower end of the household income distribution and on the income and earnings of female heads. •We use the FMAP kink to identify and estimate the effect of Medicaid’s generosity on household income in a Regression Kink Design (RKD) framework.•Analysis of March CPS data from 1980 to 2013 suggests that generous federal funding of state-level Medicaid costs have a negative effect on income.•We find that Medicaid generosity has a negative impact on household income of female heads at the lower end of the household income distribution.•Estimates imply a non-trivial income effect of Medicaid spending on income, with a lower bound income elasticity of -0.5.•A caveat is that FMAP is an imperfect proxy for Medicaid generosity and, therefore, estimates may represent an aggregate effect of changes in FMAP.
 Medicaid and household income Regression kink design

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