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Medicaid Work Requirements, Labor Market Effects and Welfare

Author

Listed:
  • Juergen Jung

    (Department of Economics, Towson University)

  • Vinish Shrestha

    (Department of Economics, Towson University)

Abstract

We develop an overlapping generations model with labor supply, health risk, and health insurance choice to evaluate the effects of imposing work requirements for Medicaid eligibility. The model is calibrated to U.S. data and used to simulate counterfactual policies that condition Medicaid access on minimum weekly work hours, with exemptions for the sick and disabled. Our partial and general equilibrium analyses show that such requirements increase labor force participation, reduce Medicaid enrollment, raise the uninsured rate, and boost output. While long-run growth can offset short-run welfare losses, most scenarios lead to net welfare declines for low-income households. High-income households, by contrast, experience welfare gains. When work requirements are extended to include the sick and disabled, the policy yields stronger growth effects and larger welfare gains. Incorporating key features of the Affordable Care Act—such as Medicaid expansion and subsidized private insurance exchanges—creates a less risky environment in which low-income individuals can substitute Medicaid with subsidized private coverage, thereby reducing welfare losses. However, the fiscal burden of insurance subsidies offsets some of the government's savings from Medicaid contraction, resulting in more modest overall growth effects.

Suggested Citation

  • Juergen Jung & Vinish Shrestha, 2024. "Medicaid Work Requirements, Labor Market Effects and Welfare," Working Papers 2024-10, Towson University, Department of Economics, revised Jul 2025.
  • Handle: RePEc:tow:wpaper:2024-10
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    File URL: http://webapps.towson.edu/cbe/economics/workingpapers/2024-10.pdf
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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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