THE EFFECTS OF MEDICAID EXPANSIONS ON INSURANCE-COVERAGE OF CHILDREN

In response to declining health status indicators for low-income child ren and growing disparities in access to health care between the insur ed and the uninsured,(1-4) Medicaid coverage for young children was ex panded in the late 1980s. Whereas Medicaid eligibility for children ha d been restricted to categorical eligibility based on eligibility for Aid to Families with Dependent Children (AFDC), new legislation expand ed eligibility for children based on income alone, with income cutoffs higher than those specified for AFDC. Congress permitted and eventual ly mandated states to provide Medicaid coverage for children up to age six in families with incomes up to 133% of the federal poverty level and to children born after September 30 1983, with family incomes up t o 100% of poverty. It also gave states the option (starting in 1988) t o cover infants with family incomes:up to 185% of poverty.(5) The hope was that these expansions would reduce the number of uninsured childr en and, thus, improve children's health. Between 1988 and 1993, the nu mber of children receiving Medicaidcovered services grew by 53%.(6) Ov er the same period, however, employer-sponsored insurance coverage was declining,(7,8) and the number of uninsured children remained high (8 .7 million in 1993).(9) This article examines several important questi ons about the impact of the Medicaid expansion. First, for which group s did Medicaid coverage actually expand! Second, did this expansion me rely substitute for private-sector coverage rather than covering child ren who were previously uninsured? These questions are important becau se, to the extent that Medicaid fails to enroll the population targete d by the expansions or simply substitutes public for what had been pri vate coverage, the expected, desired health effects may not occur.(10) Two other studies have recently examined the changing insurance statu s of children using data from the Current Population Survey (CPS). Whi le these studies find similar trends, they differ substantially in the ir interpretation of the trends. One study, by Newacheck and colleague s,(11) attributes all of the change in Medicaid coverage to secular de clines in employer-sponsored coverage; the other study, by Cutler and Gruber,(12) attributes a substantial portion of the change in Medicaid coverage to crowd-out but fails to control adequately for secular dec lines in employer sponsored coverage.(13) This Revisiting the Issues a rticle sheds more light on the issue of crowd-out (the voluntary subst itution of free health insurance coverage for children under Medicaid for employer-sponsored insurance when the terms of the employer-sponso red coverage have not changed substantially) by explicitly controlling for the secular declines in the offering, financing, and take-up of e mployer-sponsored insurance using data from the Current Population Sur vey to track changes between 1988 and 1993. Because these data are cro ss-sectional and do not follow specific families and children over tim e, it is not possible to be definitive about what caused the changes t hat were observed over this period. But it is possible to trace the ex tent to which trends in employment-based coverage for Medicaid-eligibl e children did or did not mirror trends for the ineligible population, an analysis which provides a preliminary assessment of the likely ext ent of any crowding out that might have occurred.