Wednesday, November 30, 2016

The Effect of the Affordable Care Act Medicaid Expansion on Migration

 I have a new paper out in JPAM: "The Effect of the Affordable Care Act Medicaid Expansion on Migration."

Here's the abstract:
The expansion of Medicaid to low-income nondisabled adults is a key component of the Affordable Care Act's strategy to increase health insurance coverage, but many states have chosen not to take up the expansion. As a result, for many low-income adults, there has been stark variation across states in access to Medicaid since the expansions took effect in 2014. This study investigates whether individuals migrate in order to gain access to these benefits. Using an empirical model in the spirit of a difference-in-differences, this study finds that migration from non-expansion states to expansion states did not increase in 2014 relative to migration in the reverse direction. The estimates are sufficiently precise to rule out a migration effect that would meaningfully affect the number of enrollees in expansion states, which suggests that Medicaid expansion decisions do not impose a meaningful fiscal externality on other states.
This paper gets at the heart of a classic topic in economics: the optimal division of roles between federal, state, and local governments -- known as fiscal federalism. On the one hand, assigning greater responsibility at the state or local level can help better align policy with local preferences. On the other hand, when one locality can exert an externality on another locality, decentralization can create inefficiency. Migration--especially migration in response to state-level means-tested benefits--can be a major source of externalities in this context: if a cut in means-tested welfare benefits in one state leads to migration of beneficiaries from that state to another, states might tend to engage in a “race to the bottom” which would not be optimal when viewed nationally.