Business Cycles, Medicaid Generosity, and Birth Outcomes

Birth outcomes influence many aspects of later life health and wellbeing, making healthcare access during pregnancy a policy priority. Low-income mothers often depend on Medicaid, for which eligibility is determined by their income relative to state eligibility thresholds. The prevalence of adverse birth outcomes is known to exhibit cyclical variation, due in part to changes in the composition of women giving birth in response to changing economic conditions. However, cyclical variation in adverse birth outcomes also varies with respect to Medicaid eligibility thresholds. Our analysis uses birth-records data for 2000 through 2013, aggregated into 173,936 county-by-quarter observations and linked to county-level unemployment rates and state-level parental Medicaid thresholds. Using fixed-effects negative binomial models, we examine the role of Medicaid generosity in influencing birth outcomes across business cycles. We test for interactions between Medicaid and unemployment, hypothesizing that the negative effects of recessions are worse where Medicaid thresholds are more restrictive. We find that higher Medicaid generosity dampens the negative effects of recessions on birth outcomes. The extent to which Medicaid interacts with unemployment also varies according to the age and race composition of mothers; in particular, Black mothers are both most affected by unemployment and most responsive to Medicaid generosity. Given current concerns about racial gaps in both infant and maternal mortality, our findings suggest that Medicaid may be an important feature of a strategy to close gaps in the prevalence of adverse birth outcomes across racial groups, especially during bust years.