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The Effect of Expanding Medicaid Eligibility on the Distribution of Children's Health Insurance Coverage

Federal legislation passed in the late 1980s greatly expanded the Medicaid program to include children in families with incomes at and above the poverty threshold, regardless of family structure. Using March Current Population Survey data, the author evaluates how the expansions affected private and public insurance coverage levels across the income distribution. Estimates of the extent of take-up of public coverage and substitution of private coverage are used to generate distributions of coverage under two counterfactual situations: absence of expansions, and absence of substitution. The results indicate that the expansions had an equalizing effect on coverage levels across the lower five deciles of the income distribution between 1988 and 1995. In their absence, coverage would have fallen significantly in the third through fifth income deciles. Also, if all of the increased Medicaid enrollment had come from the uninsured population, inequality in coverage levels would have decreased even further.