Study: Medicaid for Children Pays for Itself

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Study: Medicaid for Children Pays for Itself

Nina Liss-Schultz

Low-income children with access to health insurance are more likely to attend college and live longer than poor children without insurance, according to a groundbreaking new study published this month.

Low-income children with access to health insurance are more likely to attend college and live longer than poor children without insurance, according to a groundbreaking new study published this month.

Making health care available to children born into low-income families also pays off, quite literally, in the long run, as the program has proven a boon for the federal government’s tax rolls.

Using IRS data, a team of Treasury Department analysts and a Yale economist tracked the lives of 14.6 million children born in the early 1980s until they reached age 28, in an attempt to measure how Medicaid eligibility at a young age affects outcomes later in life.

The effects of Medicaid access on the lives of children are stark, the study found. Not only do those children live longer than those in similar households, they are also more likely to attend college and to get jobs with higher wages than children without Medicaid.

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While it may not be a shock that access to health insurance can help people live longer, more productive lives, a fourth conclusion from the study is perhaps the most important: Children on Medicaid plans pay more into the system and take out less.

“We find that by expanding Medicaid to children,” wrote the study’s authors, “the government recoups much of its investment over time in the form of higher future tax payments. Moreover, children exposed to Medicaid collect less money from the government in the form of the Earned Income Tax Credit.”

These findings, though based on a decades-old change in policy, are still highly relevant today, as leaders in nearly half the states in the nation battle the expansion of Medicaid, for both children and adults, outlined by the Affordable Care Act.

High on the list of arguments made against Medicaid expansion is one about cost; specifically, that increasing eligibility of the public insurance would strain state budgets.

“History has repeatedly shown that the costs of many government healthcare programs far exceed early projections,” Florida Republican Gov. Rick Scott wrote in 2012. “Medicaid expansion is bad for states because it would put a tremendous strain on state budgets and increase dependency on government programs.”

Scott, whose health-care company in the 1990s was charged with 14 felonies and fined $600 million for illegal Medicare billing practices, has since changed his opinion on Medicaid and started advocating for expansion.

Though Medicaid was created in 1965 as a way to help low-income people afford health insurance, it wasn’t until the 1980s and ’90s that significant reforms were made to the law to increase health insurance access for children. By 1996, nearly 21 percent of children in the United States were enrolled in Medicaid insurance plans.

The study published this month calls into question arguments like Scott’s by showing that not only do governments recoup a significant portion of the money spent on Medicaid, but low-income children with access to health insurance are also less likely to receive income tax credits.

“Although it will take years to know the long-term impact of current expansions of Medicaid undertaken as part of the Affordable Care Act,” Amanda Kowalski, the study’s co-author, said in a statement. “This study shows that the investments that the government made in Medicaid in the 1980s and 1990s are paying off in the form of higher tax payments now.”