Address correspondence to Krista M. Perreira, Ph.D., Assistant Professor, Department of Public Policy, University of North Carolina, Abernethy Hall, CB#3435, Chapel Hill, NC 27599-3435.
Crowd-In: The Effect of Private Health Insurance Markets on the Demand for Medicaid
Article first published online: 8 MAY 2006
Health Services Research
Volume 41, Issue 5, pages 1762–1781, October 2006
How to Cite
Perreira, K. M. (2006), Crowd-In: The Effect of Private Health Insurance Markets on the Demand for Medicaid. Health Services Research, 41: 1762–1781. doi: 10.1111/j.1475-6773.2006.00563.x
- Issue published online: 8 MAY 2006
- Article first published online: 8 MAY 2006
- health insurance;
- local labor markets
Objective. To investigate the effects of local labor market conditions and the availability of employer-sponsored health insurance on exits from the Medicaid program.
Data Source. Data for this project come from a unique administrative database containing a 2 percent sample of all cases on California's Medicaid program in 1987 and a 2 percent sample of all new cases starting each year between 1987 and 1995.
Study Design. The results are estimated using a discrete duration model where the monthly exit probability is a function of demographic characteristics, local labor market variables, the probability of having employer-sponsored insurance, and fixed year and county effects.
Principal Findings. Improvements in labor market opportunities (i.e., employment growth, wage growth, and increases in the availability of employer-sponsored health insurance) promote exits off the Medicaid program. A 2.5 percentage point increase in the availability of employer-sponsored insurance leads to a 6 percent increase in the probability that a completed spell lasts no more than 2 years. It would take a 2 percentage point decrease in unemployment rates or a 10 percent increase in average quarterly earnings to yield an equivalent increase in the likelihood of exiting Medicaid within 2 years. These effects are robust to the inclusion of county-level fixed effects and time effects.
Conclusions. Medicaid expenditures and caseloads are sensitive to local economic fluctuations and secular trends in the availability of health insurance. Continued decreases in employer-based health insurance coverage will greatly increase the demand for public insurance coverage and the financial pressures on state governments.