A Welfare Analysis of Medicaid and Crime

Abstract

We calculate conservative estimates for the marginal value of public funds (MVPF) associated with providing Medicaid to inmates exiting prison. Our MVPF estimates, which measure the ratio between the benefits associated with the policy (measured in terms of willingness to pay) and its costs net of fiscal externalities, range between 3.44 and 10.61. A large proportion of the benefits that we account for are related to the reduced future criminal involvement of exiting inmates who receive Medicaid. Using a difference-in-differences approach, we find that Medicaid expansions reduce the average number of times a released inmate is reimprisoned within a year by about 11.5%. We use this estimate along with key values reported elsewhere (e.g., victimization costs, data on victimization and incarceration) to calculate specific benefits from the policy. These include reduced criminal harm due to reductions in reoffenses; direct benefits to former inmates from receiving Medicaid; increased employment; and reduced loss of liberty due to fewer future reimprisonments. Net-costs consist of the cost of providing Medicaid net of changes in the governmental cost of imprisonment; changes in the tax revenue due to increased employment; and changes in spending on other public assistance programs. We interpret our estimates as being conservative, because we err on the side of under-estimating benefits and over-estimating costs when data on specific items are imprecise or incomplete. Our findings are largely consistent with others in the sparse literature investigating the crime-related welfare impacts of Medicaid access, and suggest that public health insurance programs can deliver sizeable indirect benefits from reduced crime in addition to their direct health-related benefits.

Note:
Funding Information: None to declare.

Declaration of Interests: None to declare.

Keywords: Medicaid, Crime, Affordable Care Act, MVPF

JEL Classification: I13, K42