How Medicaid Reduces Poverty: Summarizing the Research

In 2016, about 13 percent of the US population lived in poverty. Children continue to live disproportionately in poverty: children represent 23 percent of the population, but 33 percent of the population living in poverty. Increasing access to Medicaid for families may be one way to reduce poverty.

Research shows that Medicaid helps pull families out of poverty by providing access to affordable health coverage and lowering out-of-pocket costs. Here are some examples of that research:

Health Affairs’ Estimating The Effects Of Health Insurance And Other Social Programs On Poverty Under The Affordable Care Act

The authors developed the first health-inclusive poverty measure that factors in both the need for health insurance and the value of health benefits as resources to meet that need. They compare the impacts of different health insurance programs to non-health programs, such as social insurance, means-tested cash and in-kind benefits and refundable tax credits. They examine the population under age 65.

What It Finds

  • Medicaid is among the most effective antipoverty programs. Medicaid reduced the health inclusive poverty measure by 3.8 percentage points. This is comparable to the combined effect of all social insurance programs and greater than the effects of non-health means tested benefits and refundable tax credits.
  • Medicaid had a larger effect on child poverty than all non-health means tested benefits combined. It is estimated to reduce child poverty by 5.3 percentage points.
  • Medicaid is particularly important for people of color. It reduced the poverty rates of Hispanics by 6.1 percentage points and African Americans by 4.9 percentage points (in households with no disability recipients).
  • Health insurance benefits are important to families who receive them. Medicaid reduced poverty among its beneficiaries by 17.1 percentage points. This is higher than other types of insurance: ESI reduced poverty by 5 percentage points for those it covered and premium subsidies reduced poverty by 6.6 percentage points for those it covered.

Why It Matters

  • Public health insurance benefits (Medicaid, Medicare and premium subsidies) are among the most important antipoverty programs. They account for almost one-third of the poverty reduction from public benefits for individuals in households without a disability recipient.
  • Though the standard measure of poverty may not show it, losing health insurance could throw many families into deep economic insecurity.

Health Affairs’ Medicaid Versus Marketplace Coverage for Near-Poor Adults: Effects On Out-Of-Pocket Spending and Coverage

Researchers used Current Population Survey (CPS) and American Community Survey data to compare changes in out-of-pocket health spending and insurance coverage for the population between 100 percent-138 percent of the federal poverty level in expansion and non-expansion states between 2010 and 2015. They found that Medicaid coverage in expansion states was more affordable and produced higher coverage rates than Marketplace coverage in non-expansion states.

What It Finds

  • The rate of uninsured adults decreased by 16.4 percentage points in Medicaid expansion states (from 35.2 percent to 18.8 percent) and 11.7 percentage points in non-expansion states (from 42.9 percent to 31.1 percent).
  • Average out-of-pocket spending decreased in expansion states by $42, from $1,014 to $972. It increased in non-expansion states by $326, from $1,086 to $1,412.
  • Medicaid expansion was associated with a 4.1-percentage-point reduction in the probability of having a high total out-of-pocket spending burden and a 7.7-percentage-point reduction in the probability of having any out-of-pocket spending.

Why It Matters

  • The authors suggest that substituting Marketplace coverage instead of Medicaid coverage could lower coverage rates and increase out-of-pocket expenses.
  • Results from this study suggest that Medicaid enrollees are better shielded from financial risk than Marketplace enrollees.

Journal of Health Economics’ The Poverty –Reducing Effect of Medicaid

This 2013 study estimated the impact of eliminating Medicaid using the Census Bureau’s supplemental poverty measure and CPS data on out-of-pocket costs. The authors estimate the impact of eliminating Medicaid coverage by modeling out-of-pocket costs comparing two scenarios: the status quo and a scenario where this is no Medicaid. Under the second scenario, individuals enrolled in Medicaid are either uninsured or enrolled in different coverage.

What It Finds

  • Medicaid kept at least 2.6 million individuals out of poverty in 2010, making it the third largest anti-poverty program in the country behind the Earned Income Tax Credit and Supplemental Nutrition Assistance Program.
  • Medicaid reduced out-of-pocket medical spending per enrollee by more than half, from $871 to $376.

Why It Matters

  • The poverty-reducing effects were greatest for adults with disabilities, the elderly children and racial/ethnic minorities.
  • This study was conducted before the Affordable Care Act (ACA) and the authors believe that Medicaid’s poverty-reducing role would likely increase after the ACA.