Medicaid as a Safety Net: Does Medicaid Generosity Mitigate the Effects of Unemployment During Economic Downturns?

The Great Recession of 2008-2009 was characterized by accelerated unemployment rates and decreased insurance rates—in particular, decreased rates of employer-sponsored health insurance coverage. In times of economic uncertainty, Medicaid could act as a safety net to allow households to address their immediate health care needs and potentially mitigate some of the more severe effects of the recession. However, access to Medicaid coverage—even if used as a temporary source of coverage—can vary greatly based across states. In this manuscript, we explore the possibility that variation in potential access to Medicaid coverage based on state eligibility guidelines can have positive effects on stabilizing coverage rates, and allow some households to maintain access to care. Using two large and nationally representative databases, we find that, during the recession, residents of states with more generous enrollment eligibility limits for Medicaid saw increased Medicaid participation during the recession and were less likely to report losing access to a regular source of care. We also find evidence that residents in states with the most generous Medicaid eligibility policies reported significantly better self-reported health status, following the recession than residents in states whose policies were less generous. These results suggest that elevated Medicaid limits can provide some protections during periods of economic uncertainty while potentially stabilizing household finances and plausibly providing a pathway contributing to broader economic recovery.