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Why did the SSI-disabled program grow so much? Disentangling the effect of Medicaid

  • A. S. Yelowitz

The participation rate for working-age adults in the Supplemental Security Income (SSI) program increased by 37 percent from 1987 to 1993. This paper examines the role of public health insurance provided through Medicaid on the SSI participation decision. I use the rapid growth in Medicaid expenditure across states and over time as a proxy for its value. The estimation is complicated by the easing of standards for determining disability. If the marginal individual who entered SSI under these easier standards was healthier than the average participant, then average Medicaid expenditure would fall. Thus, conventional OLS estimates could lead to a spurious negative correlation between average Medicaid expenditure and SSI participation. I therefore apply two-stage least squares (TSLS) to estimate Medicaid's effect, using Medicaid expenditure for blind and elderly SSI recipients, and adult and child AFDC recipients as instruments for disabled Medicaid expenditure. The TSLS estimates indicate that rising Medicaid expenditure significantly increased the SSI participation for whites, but had little effect on African Americans. Among whites, the rising value of Medicaid explains one-third of the growth in SSI participation.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1090-96.

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Handle: RePEc:wop:wispod:1090-96
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  1. Moffitt, Robert & Wolfe, Barbara L, 1992. "The Effect of the Medicaid Program on Welfare Participation and Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 615-26, November.
  2. Madrian, Brigitte C, 1994. "Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 27-54, February.
  3. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  4. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  5. Moffitt, Robert & Ribar, David & Wilhelm, Mark, 1998. "The decline of welfare benefits in the U.S.: the role of wage inequality," Journal of Public Economics, Elsevier, vol. 68(3), pages 421-452, June.
  6. Janet Currie & Jonathan Gruber, 1994. "Saving Babies: The Efficacy and Cost of Recent Expansions of Medicaid Eligibility for Pregnant Women," NBER Working Papers 4644, National Bureau of Economic Research, Inc.
  7. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  8. A. S. Yelowitz, . "The Medicaid notch, labor supply, and welfare participation: Evidence from eligibility expansions," Institute for Research on Poverty Discussion Papers 1084-96, University of Wisconsin Institute for Research on Poverty.
  9. Janet Currie & Jonathan Gruber & Michael Fischer, 1994. "Physician Payments and Infant Mortality: Evidence from Medicaid Fee Policy," NBER Working Papers 4930, National Bureau of Economic Research, Inc.
  10. Jeff Grogger & Stephen G. Bronars, 1997. "The Effect of Welfare Payments on the Marriage and Fertility Behavior of Unwed Mothers: Results from a Twins Experiment," NBER Working Papers 6047, National Bureau of Economic Research, Inc.
  11. James J. Heckman & Thomas E. MaCurdy, 1985. "A Simultaneous Equations Linear Probability Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 28-37, February.
  12. Lundberg, S. & Plotnick, R.D., 1994. "Adolescent Premarital Childbearing: Do Economic Incentives Matters?," Working Papers 94-4, University of Washington, Department of Economics.
  13. Rebecca M. Blank, 1989. "The Effect of Medical Need and Medicaid on AFDC Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 54-87.
  14. 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.
  15. Anne E. Winkler, 1991. "The Incentive Effects of Medicaid on Women's Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 26(2), pages 308-337.
  16. R. A. Moffitt, . "The effect of work and training programs on entry and exit from the welfare caseload," Institute for Research on Poverty Discussion Papers 1025-93, University of Wisconsin Institute for Research on Poverty.
  17. Barbara L. Wolfe & Steven C. Hill, 1995. "The Effect of Health on the Work Effort of Single Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 42-62.
  18. B. Wolfe & S. C. Hill, . "The effect of health on the work effort of low-income single mothers," Institute for Research on Poverty Discussion Papers 979-92, University of Wisconsin Institute for Research on Poverty.
  19. Joshua D. Angrist, 1991. "Instrumental Variables Estimation of Average Treatment Effects in Econometrics and Epidemiology," NBER Technical Working Papers 0115, National Bureau of Economic Research, Inc.
  20. A. S. Yelowitz, . "Using the Medicare Buy-In Program to Estimate the Effect of Medicaid on SSI Participation," Institute for Research on Poverty Discussion Papers 1102-96, University of Wisconsin Institute for Research on Poverty.
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