Does Medicaid Expansion Lead to Income Adjustment? Evidence from the Survey of Income Program Participation

• In Event: Medicaid Access and Enrollment

Abstract

Introduction/Background
The Affordable Care Act (ACA) Medicaid expansion establishes a sharp eligibility cutoff at 138 percent of the Federal Poverty Line (FPL). Individuals with income above this threshold lose Medicaid eligibility and, during 2014–2017, faced increasing individual mandate penalties. While theory predicts labor supply responses at such thresholds, prior empirical studies using annual income measures generally find little or null effect. 

Purpose/Research Question
Medicaid eligibility is determined using monthly Modified Adjusted Gross Income (MAGI), yet most prior research relies on cross-sectional data and annual income measures. This mismatch can lead to misclassification of FPL status and attenuated estimates. By constructing a rule-based measure of monthly FPL eligibility, this paper examines whether individuals adjust earnings within the year to qualify for Medicaid. 

Data
I use panel data from the Survey of Income and Program Participation (SIPP), 2013–2019, which provides detailed monthly measures of earnings and household composition. 

Research Design and Methods
I implement a regression discontinuity design at the 138 percent FPL threshold. The running variable is prior year's lowest monthly earnings. Individuals just above the threshold must reduce earnings in their current year to qualify, while those just below do not. I compare outcomes across Medicaid expansion and non-expansion states and across periods with varying individual mandate penalties. 

Results/Findings
Childless adults in expansion states just above the eligibility threshold reduce their lowest monthly earnings by approximately 39 percentage points of the FPL (about $700 for a two-person household), relative to similar individuals just below the threshold. The response is strongest during 2015–2016, when the mandate penalty was highest, and attenuates after its elimination in 2019. Additional evidence from zero-earnings months and hours worked indicates adjustments along both extensive and intensive margins. No comparable effects are observed in non-expansion states.

Conclusion/Implications
These findings provide direct evidence of labor supply responses to Medicaid eligibility incentives that are obscured by annual income measures. Aligning measurement with monthly eligibility rules is critical for accurately estimating policy effects. The stronger responses observed during periods with an active mandate penalty highlight the role of policy design in shaping behavior. Adjustments along both intensive and extensive margins suggest meaningful short-term earnings responses near the eligibility threshold.

Author

• Mingjian Li, University of Illinois, Chicago
  Presenting Author