In-Kind Welfare Benefits and Reincarceration Risk: Evidence from Medicaid

Most of the 600,000 adults returning to the community from state and federal prisons annually in the U.S. carry substantial debt, have low income and low education, and limited formal employment prior to entering prison. Upon reentry, they face financial hardship, high rates of morbidity and mortality, and high incidence of re-offense. Medicaid coverage, as a means-tested transfer program providing subsidized health insurance, may influence reincarceration through both financial and health channels. In this paper, we provide a comprehensive look at the effects of public health insurance coverage on post-release behavior of formerly incarcerated adults. We study a natural experiment in which two separate state policy changes resulted in a 60 percentage point increase in Medicaid enrollment at release. Using a series of linked individual level administrative datasets, we estimate the effects of this change in Medicaid enrollment, finding declines in reincarceration, increased employment, and higher health care use. Leveraging data on financial concerns and need for mental health and substance use treatment to examine mechanisms, we find support for a financial channel and mixed support for health channels. Policies that enhance access to healthcare and provide financial security for this population may have significant benefits for individuals and society.