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Public Health Insurance and Private Savings

  • Jonathan Gruber

    (MIT & NBER)

  • Aaron Yelowitz

    (UCLA & NBER)

Recent theoretical work suggests that means and asset-tested social insurance programs can explain the low savings of lower income households in the United States. We assess the validity of this hypothesis by investigating the effect of Medicaid, the health insurance program for low-income women and children, on savings behavior. We do so using data on asset holdings from the Survey of Income and Program Participation, and on consumption from the Consumer Expenditure Survey, matched to information on the eligibility of each household for Medicaid. Exogenous variation in Medicaid eligibility is provided by the dramatic expansion of this program over the 1984–1993 period. We document that Medicaid eligibility has a sizeable and significant negative effect on wealth holdings; we estimate that in 1993 the Medicaid program lowered wealth holdings by 17.7 percent among the eligible population. We confirm this finding by showing a strong positive association between Medicaid eligibility and consumption expenditures; in 1993, the program raised consumption expenditures among eligibles by 5.2 percent. We also exploit the fact that asset testing was phased out by the Medicaid program over this period to document that these Medicaid effects are stronger in the presence of an asset test, confirming the importance of asset testing for household savings decisions.

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Paper provided by UCLA Department of Economics in its series UCLA Economics Working Papers with number 772.

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Date of creation: 01 Sep 1997
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Handle: RePEc:cla:uclawp:772
Contact details of provider: Web page: http://www.econ.ucla.edu/

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  4. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1263-96, December.
  5. Jonathan Gruber & Brigitte C. Madrian, 1994. "Health Insurance and Job Mobility: The Effects of Public Policy on Job-Lock," ILR Review, Cornell University, ILR School, vol. 48(1), pages 86-102, October.
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  24. Richard T. Curtin & Thomas Juster & James N. Morgan, 1989. "Survey Estimates of Wealth: An Assessment of Quality," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 473-552 National Bureau of Economic Research, Inc.
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  36. Jonathan Gruber & Brigitte C. Madrian, 1994. "Health insurance and job mobility: The effects of public policy on job-lock," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(1), pages 86-102, October.
  37. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July.
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