Medicaid expansion: Initiative killer

(Bloomberg View) — Opponents of Obamacare’s Medicaid expansion have traditionally argued that it will significantly burden state budgets and provide people with substandard health coverage. A new academic paper suggests what may be the strongest argument yet against the expansion: That it will keep many beneficiaries in poverty because it creates strong disincentives for work.

Researchers Laura Dague, Thomas DeLeire, and Lindsay Leininger argue in a National Bureau of Economic Research working paper that Medicaid enrollment will lead to significant and lasting reductions in employment among childless adults. The paper is noteworthy primarily because it focuses its analysis on low-income adults without children — – a group that previously was largely ineligible for Medicaid but will get access because of Obamacare’s expansion of the program. It reinforces a July 2013 paper, which found that the loss of public health insurance stimulated job search activities, employment growth and the acquisition of other health insurance coverage among childless adults.

The Congressional Budget Office also noted in February that Obamacare’s Medicaid expansion would reduce incentives to work and have a modest effect on the overall supply of labor. While there is a debate in the academic literature about the effects of the Medicaid expansion on labor supply, that debate has tended to focus on parents who enroll in Medicaid, rather than adults without kids.

Dague and her colleagues conclude that if the Medicaid expansion enrolls about 21 million additional adults, anywhere from 511,000 to 2.2 million fewer people will be employed. Furthermore, they argue that the Medicaid expansion will knock almost a full point off of today’s labor force participation rate — or share of the civilian population that is working — a measure of economic health that is already at its lowest point since 1977.