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The Impact of Medicaid Expansion on Household Consumption

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Abstract

We use data from the Consumer Expenditure Survey for 2010 through 2016 to compare trends in insurance coverage and consumption for household that did and did not expand eligibility for Medicaid under the Affordable Care Act in 2014. Consistent with earlier studies, we find significant increases in Medicaid coverage in expansion relative to non-expansion states, and we find small but significant reductions in quarterly health spending of about $60, or just less than one-quarter of the baseline value. We find no significant change in non-health consumption as a result of Medicaid expansion.

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Notes

  1. We do not mean to discount the stresses associated with high medical debt for low-income families, even if such debt is ultimately forgiven. The reduction in debt and accompanying stress may be a significant benefit of Medicaid expansion (Finkelstein et al. 2012), but this benefit will not be reflected in household consumption, which is our main focus here.

  2. For example, average annual income is $10,250 in the sample with residents of non-identifiable states, compared with $10,292 without them. The fraction reporting Medicaid is the same with and without residents of non-identifiable states; 48 percent report that anyone in the household has Medicaid and 39 percent report Medicaid for all household members.

  3. The imputation of consumption for housing and transportation is described briefly here. For housing, the CE asks homeowners “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” In our imputed measure of housing consumption, this “rental equivalence” value times 3 (RENTEQVX*3) replaces the CE measure “OWNDWE” for homeowners, where OWNDWE is the sum of quarterly spending on mortgage interest, property taxes, and maintenance/repairs/other expenses/insurance. Other elements of housing consumption (that is, other than OWNDWE/RENTEQVX) include expenditures on expenditures on rented dwellings, other lodging, utilities, household operations (e.g., cleaning services), and household furnishings. For transportation, we use households that have positive expenditures for new or used vehicle purchases (about five percent of the sample in any year) to estimate a linear regression predicting vehicle spending as a function of quadratics in income and total non-vehicle consumption expenditures, weeks worked by household members, expenditures on gasoline, expenditures on public transportation, vehicle maintenance expenditures, the number of cars owned, and a set of household characteristics (including age, education, region of residence, and family composition), plus quarter dummies. We use this regression to predict vehicle “services” for all households (including those that were not observed purchasing a vehicle). Our measure of vehicle consumption is this predicted measure of vehicle service, times the number of vehicles the household owns, divided by 32 (on the assumption that cars depreciate fully after 8 years). Note that other components of transportation (gas, insurance, public transportation, etc.) are measured simply using the expenditures reported in the CE.

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Acknowledgements

Financial support for this project from the Russell Sage Foundation is very gratefully acknowledged.

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Correspondence to Helen Levy.

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Levy, H., Buchmueller, T. & Nikpay, S. The Impact of Medicaid Expansion on Household Consumption. Eastern Econ J 45, 34–57 (2019). https://doi.org/10.1057/s41302-018-0124-7

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