Does Public Health Insurance Affect Labor Market Behavior? An Analysis of the Affordable Care Act's Medicaid Expansions Using Tax Records

We examine the impact of the Affordable Care Act (ACA)’s Medicaid expansion on labor market behaviors, including wages and labor market entry and exit among low-income adults. We hypothesize that public health insurance may reduce labor force attachment by reducing the “job lock” caused by employer provided health insurance. On the other hand, Medicaid may improve health and allow greater participation in the labor market. Medicaid expansion might also alter labor-leisure choices to the extent that public insurance lowers out-of-pocket expenditure on health care and the need for precautionary savings, causing an income effect that also reduces labor supply. The Medicaid expansion may affect labor force participation along both the extensive and intensive margins where some individuals may exit work altogether, or reduce work hours and transition from a full-time work to a part-time work. We test our hypotheses by using a quasi-experimental study design comparing Medicaid-expansion-eligible individuals in states that expanded ACA Medicaid to those states that did not. We do so using a panel data set of the universe of U.S. tax records spanning 2005-2014. These data have been used in prior studies by us (through 2013 tax year) in Heim, Lurie and Simon (forthcoming) to investigate labor market effects of other ACA provisions. We plan to supplement these data to examine how the ACA affects the behavior of those in poor health with data from the Health and Retirement Survey (HRS).