Did the ACA Undermine the Beneficial Effects of Medicaid for Children?
Adding millions of adults to the Medicaid program may have created access problems for those who stand to gain the most from care: kids.
Over the last few years, a number of high-quality papers have presented convincing causal evidence that giving poor children Medicaid coverage produces large and durable improvements in their health, reduces criminal behavior and incarceration, and enhances their performance in the labor market as adults. There’s even evidence of positive intergenerational effects.
A recent working paper from CBO estimates that Medicaid enrollment during childhood increases later-life earnings (thereby boosting tax revenues and reducing spending on anti-poverty programs) enough to plausibly offset about half of Medicaid’s initial outlays.
In short, the funds devoted to Medicaid coverage for children (about $3,600 per child per year) might be some of the best-spent money in the entire U.S. social safety net.
It seems that an important mechanism behind these effects — unsurprisingly — is that children on Medicaid receive more healthcare services than they otherwise would have, setting them up for a lifetime of better health.
Much of this research, however, leverages changes to Medicaid that were made in the 1980s and 1990s, when eligibility rules were tighter, total enrollment was much lower, and children made up a larger proportion of Medicaid enrollees. A lot about the federal-state program has changed since then, most notably the expansion of Medicaid under the Affordable Care Act (ACA), which added millions of adults to the program and created fiscal incentives for states to prioritize these newly eligible adults over other eligibility groups, including children.
On the one hand, expanding Medicaid eligibility for adults tends to increase Medicaid enrollment among children, too (the “woodwork effect”). That’s what the Oregon Health Insurance Experiment showed, and evidence from the ACA finds fairly large effects as well. So Medicaid expansion may be indirectly responsible for more children benefiting from Medicaid.
But there are other factors to consider. The influx of new enrollees under Medicaid expansion has strained some aspects of the health system. As I’ve noted before, several studies have linked Medicaid expansion to longer wait times for appointments, slower ambulance response times, and greater delays in the emergency room. These obstacles may make it more difficult for children to obtain care, eroding the historical benefits of Medicaid coverage for this population.
In a study with my Mercatus Center colleague Charles Blahous, I find that per capita Medicaid spending on children in states that expanded Medicaid in 2014 was only 5.9 percent higher in 2019 than it was in 2013 — an annual increase of less than 1 percent per year. Among non-expansion states, per capita Medicaid spending on children grew 22.7 percent over the same period, implying that Medicaid expansion may have redirected resources away from children.
This phenomenon has likely weakened the beneficial effects of Medicaid coverage for children, and ought to be considered when assessing the overall merits of Medicaid expansion — especially because any direct health benefits to adults from gaining Medicaid coverage are hard to detect.