Economic Effects of Medicaid Expansion

• In Event: Revisiting Medicaid Expansion and Work: Labor Supply, Coverage, and Economic Adjustment Across Populations

Abstract

In the 2012 case National Federation of Independent Business v. Sebelius, the Supreme Court found that states could not be coerced into expanding Medicaid coverage under the Patient Protection and Affordable Care Act. Because of this, and despite the fact that the federal government would have picked up the vast majority of the expense of doing so, many state governments chose not to expand Medicaid coverage providing researchers with a natural policy experiment on the effects of increasing government-funded health care in the U.S. We ask: does the expansion have meaningful impacts on state level economic outcomes? For the Medicaid expansion to have a significant effect on state-level economic outcomes, it would need to affect a significant portion of the population. Kaestner et al (2017) found that Medicaid expansion led to a large increase in coverage among childless adults while Frean et al (2017) find that Medicaid expansion was responsible for 60% of the increase in health insurance coverage in their model. Interestingly about half of that increase was among people who were already eligible. Research in whether this increased coverage is likely to increase labor supply has been mixed. Baicker et al (2014) find no evidence that a randomized increase in Oregon’s pre-ACA Medicaid eligibility had any impact on labor market outcomes. Gooptu et al (2016) look at the first 15 months after Medicaid expansion and also do not find any significant changes in labor market outcomes including workers switching jobs or changing the number of hours they worked. Kaestner et al (2017) also find limited results in terms of increased labor supply with a possible increase in work effort. Using a survey methodology, Tiperneni et al (2020) find that Medicaid expansion may have increased employment or student status in Michigan when compared to overall statewide trends, but they do not break out employment vs. student status in their results. On the opposite side of the equation, Garthwaite et al (2014) find an increase in labor supply (especially in private employment with health insurance benefits) among Tennessee residents who lost Medicaid coverage, suggesting that there could be a negative labor supply effect of expanding coverage.We look at state-level macroeconomic data both in total and within the Health Care and Social Assistance sector. We look at economic data for states that expanded and did not expand using a staggered difference-in-difference model. Our results show that states that expanded Medicaid coverage have had significantly better labor market outcomes, especially within the HCSA sector. However, we find very little evidence of a difference between the two groups of states in real GDP (in total or per capita) with the strongest results showing that Medicaid expansion increases the share of employment and GDP in the HCSA sector.

Authors

• Liam Malloy, University of Rhode Island
  Presenting Author

• Shanna Pearson-Merkowitz, University of Maryland, College Park
  Non-Presenting Co-Author