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Medicaid, Family Spending, and the Financial Implications of Crowd-Out



A primary purpose of health insurance is to protect families from medical expenditure risk. Despite this goal and despite the fact that research has found that Medicaid can crowd out private coverage, little is known about the effect of Medicaid on families’ spending patterns. This paper implements a simulated instrumental variables strategy with data from the Consumer Expenditure Survey to estimate the effect of an additional family member becoming eligible for Medicaid on family-level health insurance coverage and spending. The results indicate that an additional family member becoming eligible for Medicaid increases the number of people in the family with Medicaid coverage by about 0.135–0.142 and decreases the likelihood that a family has any medical spending in a quarter by 2.7 percentage points. As previous research often finds with different data sets, I find evidence that Medicaid expansions crowd out some private coverage. Unlike most other data sets, the Consumer Expenditure Survey allows for considering the financial implications of crowd-out. The results indicate that families that transition from private coverage to Medicaid are able to spend significantly less on health insurance expenses, meaning Medicaid expansions can be welfare improving for families even when crowd-out occurs.
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  • Marcus Dillender, "undated". "Medicaid, Family Spending, and the Financial Implications of Crowd-Out," Upjohn Working Papers and Journal Articles md17, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:md17

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    Cited by:

    1. Lipton, Brandy, 2019. "Adult Medicaid Benefit Generosity and Receipt of Recommended Health Services among Low-Income Children: The Spillover Effects of Medicaid Adult Dental Coverage Expansions," MPRA Paper 93248, University Library of Munich, Germany.
    2. Cortnie Shupe, 2021. "Public Health Insurance and Medical Spending: Evidence from the ACA Medicaid Expansion," CESifo Working Paper Series 8827, CESifo.
    3. Lee, Jun Yeong & Winters, John V., 2020. "State Medicaid Expansion and the Self-Employed," IZA Discussion Papers 12997, Institute of Labor Economics (IZA).
    4. Panchalingam, Thadchaigeni, 2020. "Effects of Public Health Insurance Expansions on Consumption Expenditures of Targeted Households," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304513, Agricultural and Applied Economics Association.
    5. Lipton, Brandy J., 2021. "Adult Medicaid benefit generosity and receipt of recommended health services among low-income children: The spillover effects of Medicaid adult dental coverage expansions," Journal of Health Economics, Elsevier, vol. 75(C).
    6. Helen Levy & Thomas Buchmueller & Sayeh Nikpay, 2019. "The Impact of Medicaid Expansion on Household Consumption," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(1), pages 34-57, January.

    More about this item


    Medicaid eligibility; crowd-out; family spending;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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