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  • September 22, 2021

The long-run benefits of Medicaid

Source: dolgachov

Medicaid provides health insurance for millions of America’s most vulnerable people. In 2015, it covered 40 percent of all children at a cost of roughly $90 billion. Some have worried that this price tag is too high. 

But in a paper in the American Economic Review, author Andrew Goodman-Bacon asserts that Medicaid coverage for children has more than paid for itself in the long run.

Goodman-Bacon found that Medicaid eligibility in early childhood reduced mortality and disability and increased employment up to 50 years later. As a result, young children in the 1960s and 1970s, who grew up with Medicaid, became healthier adults who paid more work-related taxes and relied less on welfare. 

Minorities were likely to see long-run benefits from childhood insurance coverage, as shown in Panel B of Figure 6 from the paper.



Panel B of Figure 6 from Goodman-Bacon (2021)


The x-axis in the figure marks an individual's birth year relative to the introduction of Medicaid, which is indicated by the vertical line at zero. Cohorts born closer to the introduction of Medicaid were potentially covered for a longer portion of their childhood.

The y-axis denotes the effect of a 1 percentage point difference in initial eligibility. (Medicaid eligibility criteria are decided at the state level, and some states have had much more stringent requirements than others.) 

The chart shows that there are large cumulative effects of childhood insurance coverage.

Childhood eligibility for a longer period of time led to an increasingly greater chance of employment later in life as indicated by the increasing gray line with closed circles. Similarly, longer childhood eligibility made it less likely that children would receive disability benefits later in life as indicated by the decreasing black line with open circles. 

Overall, Medicaid coverage for children added 10 million so-called quality-adjusted life years—a measure of the quality and quantity of life lived—for cohorts born between 1955 and 1975 and saved the government more than twice its original cost.

The Long-Run Effects of Childhood Insurance Coverage: Medicaid Implementation, Adult Health, and Labor Market Outcomes appears in the August 2021 issue of the American Economic Review.