There is a recent NBER paper making the wonkosphere rounds. It finds that the expansion of Medicaid eligiblity to larger pools of children have produced significant long run positive tax transfers back to the federal government. Those transfers don’t cover the entire cost of providing medical care to poor and near poor kids but they greatly reduce the program price if Medicaid expansion was to be dynamically scored.
With administrative data from the IRS, we calculate longitudinal health insurance eligibility from birth to age 18 for children in cohorts affected by these expansions, and we observe their longitudinal outcomes as adults. Using a simulated instrument that relies on variation in eligibility by cohort and state, we find that children whose eligibility increased paid more in cumulative taxes by age 28. These children collected less in EITC payments, and the women had higher cumulative wages by age 28. Incorporating additional data from the Medicaid Statisticalinformation System (MSIS), we find that the government spent $872 in 2011 dollars for each additional year of Medicaid eligibility induced by the expansions. Putting this together with the estimated increase in tax payments discounted at a 3% rate, assuming that tax impacts are persistent in percentage terms, the government will recoup 56 cents of each dollar spent on childhood Medicaid by the time these children reach age 60.
The study only looks at the net present value of increased federal tax collection. It neglects from its scope of consideration any benefits captured by the individual.
Thining extemperaneously, I think there are three things that could be driving the higher wages and thus higher taxes over the long run.
1) An income substitution effect. Medicaid always covered the poorest of the poor children, but since the mid-80s, Medicaid and later CHIP have been moving to cover more kids a little higher up the income scale each time it expanded. At some point, an additional dollar of Medicaid resources displaces a dollar that the family would have spent on medical care. That displaced dollar or fraction of a dollar could have been spent on something else that has long run pay-offs (better education, better food, more stability and predictability in formative years to produce “grit” etc)
2) Better health makes finding and keeping a job a whole lot easier. Better health makes it easier to do well in school as that pain in the leg has been taken care of instead of festering for another month or two untreated. Better health means an ability to shift attention and thought to non-health matters.
3) Better health is a social signal of respectability. People quickly judge others by their teeth, by their walk, by hundreds of subtle and not so subtle signals of class. Early childhood Medicaid might remove some negative signals.
What say ye?
Well you’re right. Except Republicans don’t care about results. They only seem to care about beating up on Obama and dogma.
I don’t find these results surprising, and I’m not sure why anyone would–anyone, that is, who actually cares about real-world outcomes. Which may leave out a whole buttload of Republicans who will find these results inconvenient.
Not surprised in the least. Poor health is a huge drag on the economy.
Your reason 1) is talking about a composition effect? The study uses longitudinal data on individuals over time, so they should be able to adjust for changing composition of eligible kids, if that is what you are talking about. I only saw the paper earlier this morning and haven’t had time to see how they control for changes over time in average minimum income level for eligibility. The estimator they use can take care of that.
The paper does find positive impacts of eligibility on mortality rates, and they only start following kids at 12 years of age, so that is probably an underestimate of the impact for all families including those with infants and young children.
So,simply, increased survival into tax-paying years would be a another mechanism.
ODS wingnuts: Shuddup, ya commie!
There could be another composition effect, which would be from differential wage growth over time. As families with higher incomes become eligible, different income groups will have systematically different rates of real wage growth, which might make some difference over a decade or more. Not sure how that could be controlled for. But until ACA, the slice of the income spectrum that qualified for Medicaid was so thin, not sure how much difference it would make. And it might be swamped by business cycle effects anyway.
@jl: Nope, I am thinking about income substitution basically let’s assume a family makes X
Medicaid for the kid is valued at Y. In a non-expansion time period, the family net income is X, in the expansion time, it is X + aY where a is some fraction of the value of Y. There are two different effects going on here. The first is that the net consumption bundle of the family increased by some amount. They are consuming more for the same cash income X.
Secondly, some of the Medicaid spending that they don’t spend displaces some of the Cash income X that they were previously spending on X. If Medicaid covers a pediatric dental visit, and the family was spending $75/year/kid on dental care, the family now has $75 more income to spend on other stuff while maintaining or increasing their dental health care consumption.
@richard mayhew: Oops. my mistake. Thanks. For some reason my mind slipped from thinking about a mechanism to a confounder for your reason 1).
Are there any studies of this type that do not show benefits? Every long term study I have every seen on long or medium term increased health, food, or just plain cash benefits finds that the recipients do better over the rest of their lives. Studies also show the reverse is true, stress in early years may have deleterious impacts for a lifetime. How do you measure the value of someone who is still fairly poor, but doesn’t turn to drugs or crime, but just keeps on plugging? If you can run dynamic scoring on those benefits, it is “welfare” that pays for itself, not tax cuts.
“Better health is a social signal of respectability. People quickly judge others by their teeth, by their walk, by hundreds of subtle and not so subtle signals of class. Early childhood Medicaid might remove some negative signals.”
But they also judge recipients of CHIP by their kitchen countertops. Which Medicaid does NOT remove, so there’s that.
you are on the money, as usual.
@Liberty60: Thank you for reminding me that we wad the “Show us your Countertops” tag :)
Richard, your previous post got me thinking. As I’ve mentioned before, I have a housemate with Ehlers-Danlos Syndrome. Although she had medical problems all her life, the EDS was not detected until her 30s. I’ve heard of other genetic disorders which do not manifest until young adulthood. When I googled, the first link I found was a report from the National Institutes of Health:
In other words, about 5.3% of people who survive birth have some genetic issues. Not all will be as severe as my friend’s, but many of those which are will require considerable expensive medical treatments. No amount of diet and exercise will cure Marfan’s, for example.
Another Holocene Human
Unfortunately, Medicaid dental is kind of a failure, the reimbursements are apparently too low and the number of dentists too low in rural areas. Maybe the gov’t should have hired dentists, a la NHS in Britain after WWII. Because what they’re doing right now ain’t fugging working.
Plus it doesn’t help that some people go into dentistry because they wanna get rich but can’t hack it in med school. (TBF, not all dentists, for example my dentist is a fucking dental nerd who decorated his office with the most amazing-creepy collection of old dental bricabrac and equipment imaginable, plus he hires hygienists who don’t gouge your gums out.) But salaried jobs with loan forgiveness if you stay on the job x number of years, like a national rural dental service, would work wonders.
Because the “market” Medicaid dental model has failed rural children.
Another Holocene Human
@JaneE: Opportunity costs don’t figure into cash accounting, which is all stupid pols can manage. The notion that Head start costs less than expanding the prison industrial complex is lost on them, and that’s before they figured out how to extract a giant rent out of the prisons.
Gin & Tonic
@Another Holocene Human: I have a friend who does that kind of rural dental work for the Australian health service. Gave up on the BS associated with a private practice, now works three days a week, Tue-Thur, they fly him to Central Nowhere, he works 12 hours a day, then flies home and has a four-day weekend every week.
An ER visit probably costs $1,000 to $1,500 (WAG). An inhaler or asthma “puffer” costs about $15 a month. . . $180 a year for meds and throw in two Doctor appts and you are up to close to $300 a year for a mildly asthmatic child.
$300 or 5 times that for an ER visit. No brainer.