The Effect of Affordable Care Act Medicaid Expansion on Post-Displacement Labor Supply among the Near-Elderly

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Abstract

Expanded health-insurance coverage under the Affordable Care Act (ACA) provides alternative channels to obtain health-insurance coverage outside employment, which in theory may affect whether people want to work, how much they work, and the sorting of individuals into jobs. Although health insurance exchanges are available in all states, ACA Medicaid expansion is only available in states that chose to expand Medicaid coverage. The state-level variation in timing of Medicaid expansion provides a quasi-experiment setting that can be used to examine how health-insurance coverage affected labor supply. In this paper, I study how Medicaid expansion affects the labor supply and re-employment outcomes of displaced (involuntarily unemployed) workers who are near-elderly, low-income, nonmarried, childless, and nondisabled. Data from 2011-2016 waves of monthly Current Population Survey (CPS) as well as 2010-2016 waves of Displaced Workers Survey (DWS) are used. Results from a discrete-choice model using the CPS suggest that, some displaced workers in expansion states became less likely to exit unemployment to employment while some others became more likely to exit unemployment to not-in-labor-force immediately following Medicaid expansion. While robustness tests suggest this may partly be attributed to state-level idiosyncrasies, my results reject large and persistent effect of Medicaid expansion on unemployment exits. The DWS does not have enough statistical power to identify the difference in re-employment outcomes between displaced workers in expansion and nonexpansion states.

Key Findings

  • During the few months immediately following a state’s Medicaid expansion, displaced workers in that state had a lower likelihood of unemployment exits to employment. That is, some displaced workers who benefited from Medicaid expansion spent a longer time in the job search.
  • During the few months immediately following a state’s Medicaid expansion, displaced workers in that state also had a higher likelihood of unemployment exits to not-in-labor-force. That is, some displaced workers stopped their job search and quit working.
  • Robustness tests suggest that some of the above effects may be attributed to state-level idiosyncrasies. Nevertheless, the results reject a large and persistent effect of ACA Medicaid expansion on labor supply among near-elderly, displaced workers in they sample.
  • There is no effect on longer-term re-employment outcomes, including the likelihood of re-employment and re-employment earnings, between expansion and nonexpansion states. However, the sample size used in the analysis of longer-term outcomes was quite small, which limited the statistical inference possible.

Citation

Fang, Chichun. 2017. “The Effect of Affordable Care Act Medicaid Expansion on Post-Displacement Labor Supply among the Near-Elderly.” Ann Arbor, MI: University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2017-370. http://mrdrc.isr.umich.edu/publications/papers/pdf/wp370.pdf

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Paper ID

WP 2017-370

Publication Type

Working Paper

Publication Year

2017