From a working paper by economist Anil Kumar at the Dallas Federal Reserve (explanatory links added):
Analysis using March supplements of IPUMS-CPS data reveals that increases in FMAP— a proxy for Medicaid generosity—significantly lower household income at the bottom quantiles of the household income distribution—the part of the income distribution that has the highest incidence of Medicaid eligibility. A one percentage point increase in FMAP is associated with a 3-6 percent decline in household income at the 20th percentile of the household income distribution and 4-11 percent reduction in total income of prime-age single female heads.
Kumar goes on to note that ignoring this effect would lead to an overstatement of Medicaid’s impact as a tool in combating poverty. Indeed, while Medicaid is usually sold as a “hand up” for poor Americans, accounting for this effect seems to indicate that the program serves to perpetuate their economic woes. If alleviating poverty is a matter of moral desert, perhaps we should abandon this policy non sequitur.
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