Missouri's Medicaid Contraction and Consumer Financial Outcomes

50 Pages Posted: 4 Nov 2020

See all articles by James Bailey

James Bailey

Providence College

Nathan Blascak

Federal Reserve Bank of Philadelphia

Vyacheslav Mikhed

Federal Reserve Bank of Philadelphia

Date Written: November, 2020

Abstract

In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. These cuts resulted in the elimination of the Medical Assistance for Workers with Disabilities program, more stringent eligibility requirements, and less generous Medicaid coverage for those who retained their eligibility. Overall, these cuts removed about 100,000 Missourians from the program and reduced the value of the insurance for the remaining enrollees. Using data from the Medical Expenditure Panel Survey, we show how these cuts increased out-of-pocket medical spending for individuals living in Missouri. Using data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel (CCP) and employing a border discontinuity differences-in-differences empirical strategy, we show that the Medicaid reform led to increases in both credit card borrowing and debt in third-party collections. When comparing our results with the broader literature on Medicaid and consumer finance, which has generally measured the effects of Medicaid expansions rather than cuts, our results suggest there are important asymmetries in the financial effects of shrinking a public health insurance program when compared with a public health insurance expansion.

Keywords: Medicaid, health insurance, consumer credit

JEL Classification: I13, I18, G51, G52

Suggested Citation

Bailey, James and Blascak, Nathan and Mikhed, Vyacheslav, Missouri's Medicaid Contraction and Consumer Financial Outcomes (November, 2020). FRB of Philadelphia Working Paper No. 20-42, Available at SSRN: https://ssrn.com/abstract=3724589 or http://dx.doi.org/10.21799/frbp.wp.2020.42

James Bailey

Providence College

United States

Nathan Blascak

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Vyacheslav Mikhed (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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