Labor Supply Incentives of Medicaid

Ponpoje Porapakkarm and Svetlana Pashchenko
Additional contact information
Svetlana Pashchenko: Uppsala University

No 1082, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: The employment rate among Medicaid beneficiaries is much lower than the employment rate among the rest of the population. To what extent this difference is due to the incentives created by Medicaid? We use general equilibrium heterogeneous agents model to evaluate labor supply distortions created by Medicaid eligibility rules and quantify its welfare effects. Using Medical Expenditure Panel Survey Dataset we calibrate the model to replicate the life-cycle patterns of employment and insurance take-up behavior as well as the key aggregate statistics for the US. We use the model to estimate potential labor income of people whom we do not observe working in the data. We find that around 23% of Medicaid enrollees will lose their eligibility if they start working. More than half of these people will choose to work if they are able to keep public insurance. These distortions are costly for the economy: if Medicaid eligibility could be linked to (unobservable) exogenous productivity the resulting ex-ante welfare gains are equivalent to 1% of the annual consumption. We explore several policy reforms and show that the best outcome is achieved if only workers can enroll in Medicaid through the categorical eligibility channel while non-workers enroll through the Medically Needy channel.

Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2013/paper_1082.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1082

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().