Medicaid Provides an Excellent Long-Term Return on Investment

By Alisa Chester and Joan Alker

As our nation marks Medicaid’s 50th anniversary of service to the nation this week, it’s a good time to reflect on how this federal-state partnership program is making a difference – especially for children and families. As has been widely discussed, Medicaid has been instrumental to our nation’s historic success in reducing the child uninsured rate.

But what is now emerging is how valuable Medicaid is to these children and society at large as they grow up and become the next generation of adults. Children who were exposed to Medicaid become healthier adults with improved educational and economic outcomes. Because the program has been around for a while, researchers are now able to study its long-term effects.

Our report released this week reviewed the latest research available on Medicaid’s long-term benefits for children. Perhaps less surprising is that having Medicaid as a child leads to better health outcomes as teenagers (lower rates of risky behaviors and better health indicators and lower rates of death from treatable causes) and as adults (lower blood pressure and fewer hospitalizations and emergency room visits).


In addition to improved health outcomes, studies show that children eligible for Medicaid are more likely to finish high school and graduate from college and pay more taxes as adults.

One study from the National Bureau of Economic Research found that the increase in tax payments as a result of the improved economic prospects of those who had Medicaid as kids returned nearly one-third (32 cents on the dollar) of the initial cost of expanding childhood Medicaid. And that is not even counting the savings that accrue from fewer hospitalizations and ER visits.

So as Medicaid turns 50, we can see that it is a sound investment that provides substantial long-term gains for society. Investing in children’s health and economic security today is a wise use of public dollars that helps to build a healthier, better educated workforce for the challenges that lie ahead.


See below for a list of several studies reviewed in the report.

  • Childhood Medicaid Coverage and Later Life Health Care Utilization
    • Laura Wherry (University of California, Los Angeles), Sarah Miller (University of Michigan), Robert Kaestner (University of Illinois), & Bruce Meyer (University of Chicago)
    • National Bureau of Economic Research (February 2015)
  • The Effect of Child Health Insurance Access on Schooling: Evidence from Public Insurance Expansions
    • Sarah Cohodes (Harvard University), Daniel Grossman, Samuel Kleiner, & Michael Lovenheim (Cornell University)
    • National Bureau of Economic Research (May 2014)
  • The Long-Term Health Effects of Early Life Medicaid Coverage
    • Sarah Miller (University of Michigan) & Laura Wherry (University of California, Los Angeles)
    • Forthcoming (posted on February 2015)
  • The Long-Term Impacts of Medicaid Exposure in Early Childhood: Evidence from the Program’s Origin
    • Michel Boudreaux (University of Maryland), Ezra Golberstein (University of Minnesota), & Donna McAlpine (University of Minnesota)
    • Unpublished manuscript
  • Medicaid and Intergenerational Economic Mobility
    • Rourke O’Brien & Cassandra Robertson (Harvard University)
    • Institute for Research on Poverty, University of Wisconsin-Madison (April 2015)
  • Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts?
    • David Brown (U.S. Department of the Treasury), Amanda Kowalski (Yale University), & Ithai Lurie (U.S. Department of the Treasury)
    • National Bureau of Economic Research (January 2015)
  • Saving Teens: Using a Policy Discontinuity to Estimate the Effects of Medicaid Eligibility
    • Bruce Meyer & Laura Wherry (University of Chicago)
    • National Bureau of Economic Research (August 2012)