Wearing Out Your Welcome: Examining Differential Medicaid Eligibility of New Entrants and Continuing Recipients

15 Pages Posted: 30 May 2017

See all articles by Sarah Hamersma

Sarah Hamersma

Syracuse University - Maxwell School of Citizenship and Public Affairs

Burcin Unel

Institute for Policy Integrity at NYU School of Law

Date Written: July 2017

Abstract

Until recently, states were permitted to have different “new entrant” and “continuing recipient” income limits for parental Medicaid eligibility by implementing income disregards that changed with spell length. Some states utilized this option—either tightening income limits for the same family over time or loosening them. In this article, we construct a theoretical model of utility‐maximizing workers facing different time‐dependent eligibility thresholds to predict the Medicaid participation and employment behavior of workers with varying wage levels. The model reveals some inter‐temporally perverse incentives created by linking eligibility thresholds to Medicaid duration. Then, we empirically test these predictions using the Survey of Income and Program Participation and a unique compilation of state‐by‐family size Medicaid thresholds for both new and continuing recipients. We find that patterns of Medicaid participation and spell duration are consistent with the predictions of our model. There is also evidence that the individuals predicted by our model to lower their work hours may supply fewer hours of labor. As of January 2014, the Affordable Care Act disallows time‐varying income disregards; our findings suggest that states previously using this strategy will experience an adjustment in Medicaid caseloads and possibly labor market outcomes because of the change.

JEL Classification: H4, I1, J2

Suggested Citation

Hamersma, Sarah and Unel, Burcin, Wearing Out Your Welcome: Examining Differential Medicaid Eligibility of New Entrants and Continuing Recipients (July 2017). Contemporary Economic Policy, Vol. 35, Issue 3, pp. 457-471, 2017, Available at SSRN: https://ssrn.com/abstract=2976570 or http://dx.doi.org/10.1111/coep.12212

Sarah Hamersma (Contact Author)

Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

400 Eggers Hall
Syracuse, NY 13244
United States

Burcin Unel

Institute for Policy Integrity at NYU School of Law ( email )

139 MacDougal St
New York, NY 10012
United States

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