Coverage-Loss Risk and Labor Supply: Evidence from Medicaid Continuous Coverage

This paper studies how reducing the risk of income-related Medicaid disenrollment affects labor supply. The Families First Coronavirus Response Act of 2020 conditioned enhanced federal Medicaid funding on states maintaining continuous coverage, prohibiting most disenrollments regardless of income changes during the COVID-19 public health emergency. Using PSID data, we estimate event-study models with individual fixed effects. Treatment status is held fixed throughout the panel to avoid conditioning on post-policy Medicaid enrollment. The baseline Medicaid group experienced a 4.6-hour (or about 14%) larger change in weekly hours worked than the comparison group (p = 0.006), robust across alternative specifications. Employment responses are concentrated among married spouses and partners (17.2 percentage points, p = 0.015), consistent with a household-level channel in which secondary-earner employment is discouraged under ordinary Medicaid rules because additional household earnings can trigger coverage loss. Among expansion-state enrollees, the probability of having taxable family income above 138 percent of the federal poverty threshold rises by 14.8 percentage points (p = 0.015), supporting the coverage-loss-risk interpretation.