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Is Medicaid crowding out other state government expenditure? Internal financing and cross-program substitution

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  • Craig, Steven G.
  • Howard, Larry L.

Abstract

We examine whether state government responses to rising Medicaid costs cause reduced low income assistance, overall state budget cuts, or higher taxes. We segment Medicaid recipient groups into families, the disabled, and the elderly. Using GMM estimation, we instrument for endogenous program participation using federally directed program recipients in a panel of 47 states from 1976 to 2004. We find that half of cost increases for elderly recipients are financed by own benefit decreases. We find that the disabled group increases Medicaid for all through cuts in other government expenditure, family recipients erode Medicaid benefits and cash assistance, Medicaid only for families is increased because of AFDC matching elimination, and taxpayers fund no cost increases.

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  • Craig, Steven G. & Howard, Larry L., 2014. "Is Medicaid crowding out other state government expenditure? Internal financing and cross-program substitution," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 164-178.
    • Handle: RePEc:eee:regeco:v:49:y:2014:i:c:p:164-178
    DOI: 10.1016/j.regsciurbeco.2014.09.003
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    2. Kattenberg, Mark & Vermeulen, Wouter, 2017. "The stimulative effect of an unconditional block grant on the decentralized provision of care," LSE Research Online Documents on Economics 86956, London School of Economics and Political Science, LSE Library.
    3. Lipton, Brandy J. & Decker, Sandra L., 2016. "The effect of Medicaid adult vision coverage on the likelihood of appropriate correction of distance vision: Evidence from the National Health and Nutrition Examination Survey," Social Science & Medicine, Elsevier, vol. 150(C), pages 258-267.
    4. Mark Kattenberg & Wouter Vermeulen, 2015. "The stimulative effect of an unconditional block grant on the decentralized provision of care," CPB Discussion Paper 308, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Mark Kattenberg & Wouter Vermeulen, 2016. "The Stimulative Effect of an Unconditional Block Grant on the Decentralized Provision of Care," SERC Discussion Papers 0209, Centre for Economic Performance, LSE.
    6. Mark Kattenberg & Wouter Vermeulen, 2015. "The stimulative effect of an unconditional block grant on the decentralized provision of care," CPB Discussion Paper 308.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Stadhouders, Niek & Kruse, Florien & Tanke, Marit & Koolman, Xander & Jeurissen, Patrick, 2019. "Effective healthcare cost-containment policies: A systematic review," Health Policy, Elsevier, vol. 123(1), pages 71-79.

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    Keywords

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    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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