Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts?

David W. Brown, Amanda Kowalski and Ithai Z. Lurie

No 20835, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the long-term impact of expansions to Medicaid and the State Children's Health Insurance Program that occurred in the 1980's and 1990's. 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 Statistical Information 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. This return on investment does not take into account other benefits that accrue directly to the children, including estimated decreases in mortality and increases in college attendance. Moreover, using the MSIS data, we find that each additional year of Medicaid eligibility from birth to age 18 results in approximately 0.58 additional years of Medicaid receipt. Therefore, if we scale our results by the ratio of beneficiaries to eligibles, then all of our results are almost twice as large.

JEL-codes: H2 I1 I38 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-dem, nep-hea, nep-pbe and nep-pub
Note: AG CH EH PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Published as The Review of Economic Studies, Volume 87, Issue 2, March 2020, Pages 792–821

Downloads: (external link)
http://www.nber.org/papers/w20835.pdf (application/pdf)

Related works:
Working Paper: Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts" (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:20835

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w20835

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().