NBER Report: Childhood Medicaid Coverage Leads to Better Health Outcomes

A new study joins a growing body of literature that sheds light on the long-term benefits and cost savings of expanding access to public health insurance. In “Childhood Medicaid Coverage and Later Life Health Care Utilization,” a working paper published by the National Bureau of Economic Research (NBER), the authors conclude that expanding Medicaid eligibility to children leads to better health outcomes and fewer associated health costs.

In the 1980s, Congress expanded Medicaid eligibility to all non-disabled children with family incomes at or below the poverty line. The expansion applied to all children born after September 30th, 1983. The authors used this date to compare children born before the cutoff date and children born after the cutoff date who had access to Medicaid. The authors found that Black children were more likely than non-Black children to benefit from these Medicaid eligibility expansions and focused on the significant results within this group.

Medicaid expansions reduced hospitalizations at age 25 for Black children eligible for Medicaid (born after the cutoff) by 8 to 13 percent. This translates into a reduction of 2,700 to 4,400 hospitalizations and savings of $15 to $25 million (based on the hospitals’ cost of the visit). Black children eligible for Medicaid had 3 to 5 percent fewer emergency department visits at age 25, representing 10,600 to 15,100 fewer visits and savings of $6.5 to $9.2 million. Results were even more pronounced for hospitalizations and emergency department visits related to chronic illnesses and patients who live in low-income zip codes.

Overall, expanding eligibility to more children cost a total of $652 million. Fewer health costs by those children later in life saved $15 to 25 million, between 3 to 5 percent of the total cost of expansion. As stated, if benefits of childhood Medicaid eligibility continue after age 25, the savings may be even greater.

With debates about the cost of Medicaid heating up, this study fits right into the existing literature that the long-term effects of expanding Medicaid eligibility leads to government savings, improves educational outcomes for children, and leads to lower rates of mortality.