Medicaid Expansion’s Impact on Poverty

This is the research I’ve been waiting for – a study that meaningfully demonstrates the impact of Medicaid expansion on poverty. Zewde and Wimer analyze Supplemental Poverty Measure (SPM) outcomes, rather than medical bankruptcy claims or income level, as a function of state Medicaid expansion status. The SPM is a composite measure with four components: first, spending on a core set of goods (food, clothing, shelter, and utilities); second, geographic differences in the level of needs based on housing costs; third, treatment of cohabitating couples as married couples; and fourth, addition of resources such as tax credits, in-kind benefits, and deduction of out-of-pocket expenditures such as medical spending, work expenses, and child care. Deducting out-of-pocket medical spending is particularly important in assessing the impact of Medicaid expansion on poverty. 

Using the SPM, the study found that Medicaid expansion elevated about 690,000 people out of poverty. With 40 million people living in poverty in the U.S., this change represents <2% of impoverished Americans. Given that Medicaid expansion has been in place in some states for five years, these findings raise the question: why is expansion not having a greater anti-poverty effect? 

There are several factors. First, out-of-pocket expenses are still growing. In no place is this more evident than where I work in west Baltimore, where over one-third of the families experience poverty. Even with Medicaid in place, co-pays for prescriptions, doctor’s visits, and hospitalizations quickly outstrip cash on hand for many individuals. Second, 14 states, including states with poverty rates higher than the national average, have not expanded Medicaid. In my opinion, poverty is arguably the greatest contributor to our failure to meet Healthy People goals set by the Centers for Disease Control. To buffer increasing costs, it is imperative that we protect the ACA and encourage Medicaid expansion in states that have not yet done so. Third, we need to cut costs. Perhaps universal coverage for all Americans might incentivize the federal government to aggressively keep costs under control. 

Abstract

Out-of-pocket spending on health care pushed over 10.5 million Americans into poverty in 2016. Medicaid helps offset this risk by providing medical coverage to millions of poor and near-poor children and adults and thereby constraining out-of-pocket medical spending. This article examines whether recent state-level expansions to the Medicaid program resulted in reductions in poverty and whether future changes to the program are likely to have similar impacts on poverty. Using a difference-in-differences research design, we found that the recent Medicaid expansion caused a significant reduction in the poverty rate. Moreover, by simulating a counterfactual poverty rate for a hypothetical world without Medicaid coverage, we found that the program’s antipoverty impact grew over the past decade independent of expansion, by shielding beneficiaries from growing out-of-pocket spending. Future expansions or retractions of Medicaid are likely to produce associated effects on poverty.

PMID: 30615519 

Zewde, N and Wimer, C. Health Affairs. 2019; 38 (1): 132-138.