Medicaid expansion advocates frequently appeal to our compassion. But is expanding Medicaid really compassionate? A recent study on employment rates suggests that rather than leading to positive results for recipients, Medicaid expansion could trap hundreds of thousands of new recipients (mostly adults with no dependent children) in a system that creates disincentives to work and thereby increases unemployment. This news follows studies that have previously shown that Medicaid recipients are no better off, and are often worse off, than individuals with no insurance at all.
This effect of Medicaid expansion on employment should be deeply worrisome for those concerned about the long-term employability of many individuals. A new research report from the National Bureau of Economic Research (NBER) validates these concerns by finding that expansion of Medicaid will further increase unemployment by creating additional disincentives for individuals on public assistance to find work.
Using CPS data, we estimate that between 840,000 and 1.5 million childless adults in the US currently earn less than 200 percent of the poverty line, have employer-provided insurance, and are not eligible for public health insurance. Applying our (NBER) labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance. This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.
This decline in employment will prove especially problematic for Ohio which has already been struggling over the last decade with labor-force participation challenges. A recent Mercatus Center paper established that if Ohio achieved its pre-Great Recession labor-force participation rate, its unemployment rate would be 4.5 percent higher, or 11.5 percent! The Medicaid induced decline in employment will also be particularly devastating for men.
A recent story from Nicholas Eberstadt of the American Enterprise Institute illustrates how dire the current job market is, particularly for men, despite all the sunny talk of declining unemployment rates.
In 1953, about 14 percent of adult men were out of the labor force—around one in seven. Today 30 percent are neither working nor seeking work—nearly one in three.
…In the early 1950s, practically all men in this age group (25-54) were either working or looking for work—fewer than 3 men out of every 100 were out of the labor force. By contrast, over 11 out of every 100 men of prime working age are completely out of the labor force today—one in nine, fully four times the fraction back in the early postwar era. This flight from work at prime working ages accounts for the vast majority of the 13 percentage point drop in employment ratios reported for this key demographic group over the past sixty years (i.e., 1953-2013).
Earlier in the piece, Eberstadt states that if employment ratios were back at their peak from the Eisenhower era, a whopping 20 million more men would be working.
Enter the proposed Medicaid expansion. The Urban Institute has estimated that Medicaid expansion in Ohio would add 578,000 new people to Medicaid who are at or below 138 percent of the Federal Poverty Guideline. Of those, 322,000, or 55.7 percent, will be adult men—the very group that Eberstadt identified as problematically exiting the labor market.
Given the NBER’s study, and data regarding decreased labor-participation rates, it is troubling that there is no work requirement for new recipients to obtain Medicaid coverage. To the contrary, any effort by the state to attempt to put one in place is extremely unlikely to be permitted by the U.S. Department of Health and Human Services.
For all the talk of moving people off of Medicaid, it will prove to be difficult to accomplish this task once they are added to the Medicaid rolls, and taken off the employment rolls.
Medicaid expansion is not like welfare reform in the 1990s. In the absence of Congress passing a new law, the only way to make permanent reforms similar to those made in the 90s that removed so many from the welfare rolls is to run a state program that is not beholden to the federal government. Simply put, the negative incentives to employment are a part of the mandated federal plan.
Governor Kasich has made it clear that he wants to get Ohioans working again and deserves plaudits for efforts to reform the tax code and streamline regulatory red tape. Expanding Medicaid, however, will do just the opposite—by encouraging individuals who currently are working to join the number of Ohioans who have already left the workforce.