The Antipoverty Effects of Medicaid Are Growing with State Program Expansions

Out-of-pocket spending on health care pushed over 10.5 million Americans into poverty in 2016, according to poverty statistics from the U.S. Census Bureau. Medicaid helps offset this risk by providing medical coverage to millions of poor and near-poor children and adults and thereby constraining out-of-pocket medical spending. The program is one of the largest components of the safety net for low- income households and comprises nearly ten percent of the United States federal budget. Nevertheless, it remains unclear whether recent Medicaid expansions reduced poverty, or whether future expansions, or retractions, of the program will produce more significant repercussions for the nation’s overall poverty level than in the past.

This study addresses two questions. First, did the recent expansions of Medicaid reduce the overall rate of poverty? Second, are future expansions or retractions likely to produce similar or even greater repercussions for poverty? We address the first question using a difference-in-differences design with state- and year- fixed effects, and find that Medicaid expansion caused a significant reduction in the poverty rate. To address the second question, we simulate a counterfactual poverty rate among beneficiaries in a hypothetical world without Medicaid coverage for each year between 2010 and 2016. We find that the program’s impact grew over the past decade independently of expansion by shielding beneficiaries from growing out-of-pocket spending without coverage. Future expansions or retractions of Medicaid and its healthcare services are likely to produce associated effects on poverty.