The effects of Medicaid expansions and welfare reform on fertility and the health of women and children.

• Author: Kaestner, Robert
• Position: Research Summaries

Medicaid Expansions

Expansion of publicly-financed health insurance programs has been an integral feature of recent efforts to reduce the number of uninsured, non-elderly persons in the United States. The origin of this approach was the creation of Medicaid in 1965. The expansion of Medicaid eligibility to near-poor, pregnant women who were not eligible for Aid to Families with Dependent Children, which took place between 1986 and 1989, solidified the use of this approach for reducing the number of non-elderly uninsured.

The expansion of Medicaid and the creation of the State Children's Health Insurance Program (SCHIP) resulted in a large increase in the number of women and children with publicly financed health insurance. For example, between 1987 and 2008 the proportion of children under age 18 (under age 3) with publicly financed health insurance increased from 16 to 30 percent (20 to 38 percent). Surprisingly, though, the proportion of children without health insurance coverage did not decline commensurately with these changes. Between 1987 and 2008, the proportion of children under age 18 (age 3) without any health insurance coverage decreased from 13 percent to 10 percent (12 percent to 9 percent). The large increase in publicly provided health insurance coverage and the relatively small decrease in rates of uninsured between 1987 and 2008 suggest that part of the increase in participation in public programs came at the expense of private insurance coverage. This substitution of public for private health insurance coverage--"crowd out"--continues to be an important part of the debate over how to reduce the number of uninsured. (1)

While estimates of the extent of crowd out vary, most studies find some level of crowd out, which differs by age of child and by family income. For example, Yazici and I (2) estimate that approximately 15 percent of the increase in Medicaid enrollment among children up to age 9 between 1988 and 1992 was at the expense of private insurance. Two other important findings emerge from this analysis. First, the expansions were associated with an increase in enrollment for those who were always eligible for Medicaid. This might be because the expansions increased the proportion of persons enrolled in Medicaid and, as a result, decreased the stigma associated with participation. Or, it could be because the expansions increased the number of providers who serve Medicaid patients, thereby making it easier to find a provider and increasing the benefit of Medicaid participation. Second, much of the switching from private to public insurance occurred among families that suffered employment and income losses. For this group, publicly provided insurance was a much needed backstop, not simply a desirable alternative to private insurance.

Given that the Medicaid expansions initially were targeted at pregnant women, it is notable that there has been very little study of the issue of crowd out for that group. In a recent paper, some colleagues and I address this research gap using confidential data from the National Hospital Discharge Survey, which provides information about the health insurance coverage of women giving birth. (3) This study too has several notable findings. First, the effects of the Medicaid expansions differed significantly by the level of eligibility. Eligibility expansions that occurred in the late 1980s and were targeted at the poorest women resulted in significantly larger declines in the proportion of uninsured pregnant women than later expansions that targeted higher income groups. The differential declines in the proportion uninsured are attributable to much smaller relative declines in private insurance among the poorest women, which is reasonable given that they were least likely to be covered by private insurance prior to the expansion. However, because the expansions increasingly focused on women from higher income groups who were more at risk of switching from private insurance, the extent of crowd out grew over time. Indeed, our estimates suggest that up to 80 percent of the growth in Medicaid enrollment among women in the highest income eligibility groups came at the expense of private insurance.

While Medicaid and other publicly provided health insurance programs focus on health insurance coverage, the ultimate purpose of these programs is to improve the health of previously uninsured persons by giving them the financial means to obtain the care required to maintain good health. This purpose is explicit with regard to the initial...