A Win-Win for Working Families and State Budgets

8/21/2019 A Win-Win for Working Families and State Budgets

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A Win-Win for Working Families andState Budgets

Pairing Medicaid Expansion and a $10.10 Minimum Wage

By Rachel West and Michael Reich October 2014


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A Win-Win for WorkingFamilies and State BudgetsPairing Medicaid Expansion and a $10.10 Minimum Wage

By Rachel West and Michael Reich October 2014


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1 Introduction and summary

3 Background

8 Data and methods

13 Results

19 Conclusion

20 About the authors and acknowledgments

21 References

23 Appendix A:

Underreporting in the March CPS

24 Appendix B:

Pre-trend falsification test

26 Appendix C:

Model estimation process

30 Appendix D:Policy simulation results: A $10.10 minimum wage

in nonexpansion states

31 Endnotes

Contents


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1 Center for American Progress | A Win-Win for Working Families and State Budgets

Introduction and summary

How do minimum wage increases affec expendiures on means-esed public

assisance programs?

A a ime when concern over income inequaliy is growingand here is conenious

debae abou governmen defici spendinghe possibiliy ha a higher minimum

wage may affec public assisance spending holds grea relevance or boh he public

and policymakers. Tis possibiliy is paricularly salien in he 24 saes ha have

no expanded Medicaid under he Affordable Care Ac, or ACA, as o January 2014.1

In his paper, we sugges a sraegy whereby saes can simulaneously expand healh

care, boos he income o working amilies, and generae savings in heir sae

budge by raising he minimum wage in conjuncion wih expanding Medicaid.

Higher minimum wages will boos income among sruggling working amilies.

Medicaid expansion will lead o wider healh care coverage, as well as a reducion

in he number o uninsured and he significan public coss associaed wih he

care o he uninsured.

Tis repor finds ha higher minimum wages lead o a saisically significan

enrollmen reducion in radiional Medicaidha is, he porion o Medicaid or

which saes have always paid a subsanial share o he cos. Specifically, he resuls

o he economeric analysis developed in his repor imply ha a 10 percen increase

in he minimum wage reduces radiional Medicaid enrollmen among he non-

elderly and non-disabled by 0.31 percenage poins.

Tus, considered alongside Medicaid savings or saes, he dual policy package o

Medicaid expansion and higher minimum wages represens a win-win siuaion

or sae policymakers and low-income working amilies. Unlike saes radiionalMedicaid programs, he ederal governmen pays he ull cos o care or hose

who are newly eligible or he firs hree yearsand he lions share hereafer

under he Medicaid expansion.2Tis reducion in enrollmen will lead saes and

heir residens o save money on radiional Medicaid.


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For he 24 saes ha did no expand Medicaid under he ACA beginning in 2014

he so-called nonexpansion saesour resuls imply ha i implemened in 2014,

a $10.10 per hour minimum wage coupled wih Medicaid expansion would reduce

saes pre-ACA Medicaid expendiures by more han $2.5 billion per year. Tis

represens a spending decrease o more han 1.5 percen among he nonexpansion

saes and 0.6 percen relaive o naional 2012 Medicaid expendiures. o arrivea hese findings, we ake accoun o he saes 2014 minimum wage levels and use

baseline Medicaid enrollmen daa rom he year 2012, he mos recen year or

which daa are available in our se.

I saes chose o index heir minimum wages o a measure o inflaionensuring

ha he purchasing power afforded by he minimum wage would rise a he same

rae as prices in he uureheir respecive minimum wages would increase a he

same rae as Medicaid eligibiliy hresholds, which are ied o he ederal povery

level, or FPL. Accordingly, he savings over a decade would be abou 10 imes

greaer han he one-year savings. In 2014 dollars, he 10-year savings acrossnonexpansion saes would oal approximaely $25.1 billion.

Te repor proceeds as ollows:

Secion 1 provides background inormaion on minimum wage policies and on

he Medicaid program and discusses he ineracion beween hem.

Secion 2 describes he daa we use and discusses our mehods.

Secion 3 provides our main resuls. We presen a sae-by-sae simulaion o

he savings o saes rom increasing minimum wages o $10.10 per hour during

Medicaid expansion.

Secion 4 presens our conclusion.

Furher deails are provided in a series o appendices.


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Background

By definiion, governmen spending on a means-esed program should decline when

income among he programs arge populaion rises. For he group o Medicaid

recipiens we ocus on herehe non-disabled and non-elderly, who are mos likely

o be affeced by a minimum wage increaseincome hresholds deermine Medicaid

eligibiliy. In mos saes, eligibiliy or he ull benefis o he program is coningen

upon income being below a specified level.3

Noneheless, i is no clear o wha exen minimum wage policywhich aims oenhance he income o low-wage workersaffecs Medicaid eligibiliy. On he one

hand, low-wage workers and heir amilies are disproporionaely eligible orand

enrolled inMedicaid. I many enrolled workers have incomes ha bring hem

close o becoming ineligible or he program, a higher minimum wage ha leads o

an income increase among hese amilies could decrease enrollmen, and hereby

reduce Medicaid program expendiures. On he oher hand, i mos working amilies

earnings are ar enough below he hreshold ha heir Medicaid eligibiliy remains

unaffecedor i increasing he minimum wage has litle or no impac on heir

incomehen overall Medicaid enrollmen will be unresponsive o he minimum

wage. Finally, i minimum wage increases cause firms o cu jobs or reduce heir

employees working hours, higher minimum wages could cause greaer Medicaid

enrollmen among amilies. For hese reasons and ohers, he ne effec o a minimum

wage increase on Medicaid enrollmen is no sel-eviden: he quesion mus be

addressed wih a careul causal analysis.

Related research

Much o he large lieraure on he impac o minimum wage increases has ocusedon earnings and employmen effecs. Very ew sudies have explored he relaionship

beween he minimum wage and public assisance programsmuch less quanified

he causal effecs o minimum wage policy on enrollmen or expendiures in hese

programs. Research economis Sylvia Allegreto and her Universiy o Caliornia,


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Berkeley, colleagues show ha low-wage workersand, in paricular, as-ood

workersare ar more likely o be recipiens o public assisance programs han

oher workers.4However, heir sudy does no atemp a causal analysis o he

effecs o minimum wages on such programs.

Our previous sudy is he firso our knowledgeo examine he causal impaco minimum wage policy on he SNAP program.5Examining daa rom he pas wo

decades, we find ha a 10 percen increase in he minimum wage reduces SNAP

enrollmen beween 2.4 percen and 3.2 percen and reduces expendiures by an

esimaed 1.9 percen. Tese findings imply ha a minimum wage increase o $10.10

per hour would reduce SNAP enrollmen naionally by 3.3 million o 3.8 million,

and reduce expendiures by nearly $4.6 billion per year.6

Universiy o Massachusets, Amhers proessor Arindraji Dubes research on he

causal effec o he minimum wage on amily povery is perhaps boh he mos

relevan and he mos mehodologically similar sudy o his repor.7Dube findsha a $10.10 ederal minimum wage would lif he income o abou 4.6 million

non-elderly Americans above ederal povery level.8Since eligibiliy and benefi

levels or many public assisance programs, including Medicaid, are ied o he

FPL, Dubes findings have direc implicaions or his sudy.

Some o he lieraure on saey ne programs concerns ineracions among he

programs. For example, Aaron Yelowiz, a naionally known economis, finds ha

changes in enrollmen requiremens or Medicaid had spillover effecs on enroll-

mens in SNAP.9For every 10 newly eligible amilies who enrolled or Medicaid

benefis, 4 also enrolled in SNAP. As Yelowiz suggess, amilies may firs become

aware o heir SNAP eligibiliy when hey apply or Medicaid. Tus, enrollmen

may increase simply by making i easier o apply or muliple programs a he same

ime. Harvard proessor Kaherine Baicker and her colleagues find ha enrollmen

in Medicaid has no effec on employmen or earnings, bu does increase he

probabiliy o SNAP receip by 10 percenage poins.10

The minimum wage

Alhough here are saes in every region o he Unied Saes ha have adoped

higher minimum wages han he ederal level, sae-level minimum wage legislaion

is no disribued randomly by geography. In he 2013 sudy Credible Research

Designs or Minimum Wage Sudies, economis Sylvia Allegreto and her


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colleagues show ha saes enacing minimum wage policy vary sysemaically

rom he oher saes in a number o characerisics ha affec low-wage employ-

men rends, bu are no hemselves relaed o minimum wage policy.11

Te nonrandom disribuion o minimum wage policy has imporan implicaions

or sudying he effecs o he minimum wage on oucomes such as employmen andearnings. In paricular, naional panel sudies ha atemp o uncover hese effecs

using sae and ime fixed effec modelssuch as a 1992 sudy by David Neumark

and William Wascherwill spuriously esimae negaive employmen effecs.12

Indeed, he resuls in ha paricular sudy are atribuable o pre-exising rends:

ess or pre-exising employmen rends reveal ha low-wage employmen had been

declining as much as wo years beore higher minimum wages were implemened.

Tese pre-rends violae a key assumpion o he research design, biasing he resuls.

However, researchers can eliminae hese pre-exising rends by making a saisically

large number o local comparisons ha accoun or heerogeneiy among saes and

over ime. For his reason, we conduc ess or pre-exising rends in our enroll-men measures and use model specificaions ha include local comparisons as

done in he sudy by Allegreto and her colleagues.13(see Appendix B)

The Medicaid program before the ACA

Medicaid was esablished o provide specific groups o disadvanaged and lower-

income individuals wih access o healh care services. Alhough he program is

volunary, all saes paricipae. Each sae adminisers is own Medicaid program

consisen wih ederal law, and he ederal governmen and he saes joinly und

he program. For he Unied Saes as a whole, he ederal share o Medicaid spending

in fiscal year 2012 was 57 percen and he sae share was 43 percen.14However,

he ederal sharewhich is deermined based on saes per capia income levels

varies rom a low o 50 percen in 10 saes o a high o 74 percen in Mississippi.15

In he pas, saes had broad discreion o deermine eligibiliy crieria, alhough a

sae mus cover individuals in cerain mandaory eligibiliy groups called ca-

egorically needy under ederal law.16As a resul, saes Medicaid programs vary

widely. According o he Ceners or Medicare & Medicaid Services: Each saeesablishes is own eligibiliy sandards, benefis package, paymen raes and

program adminisraion under broad ederal guidelines. As a resul, here are

essenially 56 differen Medicaid programsone or each sae, erriory and he

Disric o Columbia.17


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As o 2012, all saes had exended Medicaid coverage beyond he minimum ederal

requiremens in one or more ways: by using waivers o es new delivery and paymen

mehods, or example, and by offering coverage o medically needy populaions and

poor young aduls.18Imporanly, as o 2012, all saes offered Medicaid o cerain

poor employed and unemployed parens o dependen children. welve saes and

Washingon, D.C. had also exended coverage o cerain poor childless aduls. Whilehe daa used in his analysis include all non-elderly groups, he majoriy o amilies

whose Medicaid eligibiliy would be affeced by a minimum wage increase will likely

be amilies ha include such parening or nonparening aduls raher han he

caegorically needy or medically needy.

Te degree o coverage or such adulsha is, or non-disabled, non-elderly

adulsis governed primarily by income, measured relaive o he FPL. Te

eligibiliy hreshold may also vary according o employmen saus and number o

dependen children. In some saes, hese hresholds pu amilies who would be

affeced by he minimum wages a he margin o eligibiliy. A worker wih a singlechild earning a minimum wage o $7.25hus earning abou $15,080 per year,

jus under he FPL in 2012would have been eligible or Medicaid in 26 saes.

wo aduls earning minimum wage while supporing wo children would have

earned abou 138 percen o he FPL in 2012, and would have been eligible or

Medicaid in 20 saes.

Medicaid enrollmen is lower han he Medicaid-eligible populaion. Alhough

Medicaid ake-up raes are difficul o measure, hey are known o be subsanially

less han 100 percen and o vary boh by sae and over ime. In 2005, Amy Davidoff

and her colleagues a he Urban Insiue used he 2002 Naional Survey o Americas

Families, or NSAF, o analyze adul Medicaid ake-up raes. Tey esimae a ake-up

rae o 52 percen naionally, wih a range rom 32 percen in exas o 76 percen

in Massachusets. Oher naional esimaes have been boh lower and higher.19Te

preerred specificaion ha we presen in he repor includes saisical conrols or

heerogeneiy across saes, regions, and ime. We hereore effecively eliminae

variaion in ake-up raes ha is unrelaed o minimum wage effecs.

Changes to Medicaid under the ACA

Te ACA required saes o expand heir exising Medicaid programs by exending

coverage o all individuals and amilies wih incomes effecively under 138 percen

o he FPL. In 2012, he Supreme Cour held ha he decision o expand Medicaid


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was opional or saes.20As o January 2014, he baseline or his economic model

26 saes and Washingon, D.C.had chosen o expand heir Medicaid programs

under he ACA.21Te ederal maching rae or he Medicaid expansion is 100

percen rom 2014 hrough 2016. Tereafer, saes will conribue a small share o

expansion coss, which will be capped a 10 percen by 2020.22

In our policy analysis, we consider he effecs o he minimum wage on Medicaid

enrollmens in saes ha did no expand Medicaid under he ACA as o January

2014.23Since Medicaid programs in nonexpansion saes have no undergone

broad srucural change since 2012he final year o our hisorical daawe are

able o apply he findings o our analysis direcly in hese saes.

Because his policy exercise is developed or 2014, we include Pennsylvania among

he nonexpansion saes. Pennsylvania approved Medicaid expansion in lae 2014,

bu expansion will no ake effec unil 2015. Below, we discuss he sensiiviy o

he resuls o he exclusion o Pennsylvania.


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Data and methods

Tis sudy uses he variaion in binding minimum wage changes across saes and

ime o esimae he causal impac o minimum wage policy on enrollmen in

radiional Medicaid.

Daa on Medicaid paricipaion among amilies during he 15-year inclusive period

rom 1998 o 2012 are aken rom he Annual Social and Economic Supplemen

o he Curren Populaion Survey, commonly called he March CPS.24Te March

CPS is an annual Census Bureau survey ha includes inormaion a he individual,amily, and household levels on paricipaion in and income rom various ranser

programs.We rack Medicaid enrollmen a he amily level, using an indicaor or

wheher any non-elderly members o he amily were enrolled in Medicaid during

he survey year.25

We also consruc a ime series o sae-level Medicaid income eligibiliy hresholds

or wo groupsemployed parens o dependen children and unemployed parens

o dependen childrenbased on he Henry J. Kaiser Family Foundaion survey

daa.26As noed above, saes Medicaid programs differ widely in erms o he sub-

populaions hey cover and he levels o service hey provide hese subpopulaions.

Tese wo income eligibiliy hresholds serve as indices o program generosiy

across saes and ime.27

o hese variables we merge a sae-level daa se on minimum wages, unemploy-

men raes, employmen o populaion raios, and median amily income levels.

Minimum wage daa are available rom he Bureau o Labor Saisics, or BLS. For

sae minimum wage changes enaced a imes oher han he beginning o he

calendar year, we use an average value or he year. Annual unemploymen and

employmen daa are also aken rom he BLS, and sae-level populaion seriescome rom he iner-decennial Census releases. We also employ a sandard se o

demographic conrols rom he March CPS such as amily size and composiion,

as well as racial and ehnic idenificaion.


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Sample description

Te March CPS comprises responses rom he residens o 50,000 o 60,000 dwelling

places surveyed each year and conains deailed inormaion on he residens

employmen and income, including income rom ranser paymens. Te sample or

our Medicaid analysis, which includes only amily unis wih a leas one non-elderly adul, consiss o more han 866,000 observaions during he inclusive period

rom 1998 o 2012. Naionwide, hroughou all he years in he sample, 15.6 percen

o amilies in he March CPS sample repored ha a leas one non-elderly member

received Medicaid. Medicaid enrollmen has increased subsanially over he decade

we examine: In 1998, he proporion o amilies ha had a leas one enrolled

member was 11.9 percen. By 2012, repored enrollmen among amilies across

he naion had reached 20.8 percen o he populaion. able 1 displays average

values o key variables a he sae levelincluding Medicaid enrollmen and

expendiuresor boh he enire span o our Medicaid analysis and he mos

recen year o daa in 2012. For purposes o he policy analysis in he ourh seciono his repor, he able also provides he same inormaion separaely or he 24

saes ha had no expanded Medicaid under he ACA as o January 2014.

I is well known ha repored benefis in he March CPSincluding Medicaid

receipare subsanially lower han enrollmen recorded by adminisraive

sources. Te exen o underreporing and is reamen in his analysis are discussed

in Appendix A.


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Methods

Our primary empirical sraegy examines he sensiiviy o amilies paricipaion

in Medicaid o minimum wage policy. Our approach idenifies he effecs o

minimum wage policy on he exernal marginha is, he effec o he minimum

wage on he likelihood ha a amily paricipaes in he Medicaid program a all,

holding oher relevan characerisics and condiions consan.

For several reasons, we do no atemp o explore he direc impac o minimum wage

policy on he amoun o Medicaid spending on recipien amiliesha is, he

inernal margin. Unlike he case wih SNAP, he majoriy o Medicaid benefis do

no vary sysemaically wih income. Moreover, he relaionship beween eligibiliy

and amily expendiures on healh care is no deerminisic. Alhough he variance

in expendiures per enrollee is high, a small share o he enrolleesin paricular,

disabled enrolleesaccoun or a very large porion o program spending. Tevariance in Medicaid expendiures among he non-elderly and non-disabled is hus

much smaller.

TABLE 1

Descriptive statistics

Average across states

All states Non-Medicaid expansion states

1998 to 2012 2012 only 1998 to 2012 2012 only

Mean

Standard

deviation Mean

Standard

deviation Mean

Standard

deviation Mean

Sta

dev

Medicaid enrollment rate (persons) 11.2% 3.7% 14.3% 3.6% 11.0% 3.4% 14.2% 3

Medicaid enrollment rate (families) 15.7% 5.3% 20.8% 4.5% 15.6% 5.0% 21.2% 4

Medicaid expenditures (in millions of dollars) $4,661 $6,932 $7,777 $10,100 $3,885 $4,353 $6,911 $6

State minimum wage $5.50 $1.20 $7.43 $0.36 $5.33 $1.08 $7.32 $

Federal minimum wage $5.33 $1.05 $7.25 $5.33 $1.05 $7.25

Unemployment rate 5.7% 1.9% 8.7% 2.0% 5.5% 1.8% 7.0% 1

Median family income $49,250 $11,374 $59,044 $8,459 $46,895 $9,847 $57,987 $6

Employment-to-population ratio 70.3% 4.9% 66.3% 4.9% 70.3% 4.8% 66.8% 5

Note: All states includes 50 states and Washington, D.C. All states are equally weighted. Non-Medicaid expansion states includes the 24 states that have not expanded Medicaid under the ACare Act as of 2014. We count as a family unit any individual residing on his or her own; two or more persons residing together, who do not belong to a family in the March CPS sample, are cas one family in this analysis. Medicaid enrollment rates are derived from the March CPS and are not adjusted for undercounting.

Source: Authors calculations from the Bureau of Labor Statistics, March Current Population Survey (Washington, Bureau of Economic Analysis, 2014), available at http://www.bea.gov/scb/pdf/2014/03%20March/D%20Pages/0314dpg_a.pdf.


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Furhermore, healh care needs and healh care usage may differ significanly by

income. I is unclear wheher income increasessuch as wha migh resul rom

minimum wage changeswould lead amilies ha mainained eligibiliy o

consume more or ewer Medicaid services. I is addiionally unclear wheher

amilies whose incomes are close o he eligibiliy hresholdha is, hose who

would be mos likely o become ineligible under a wage increasegenerae moreor less in coss o he Medicaid program han amilies whose incomes are ar

below he eligibiliy hreshold.

Distinguishing causation from correlation

I is crucial o ensure ha our analysis does no pick up spurious correlaions

beween minimum wage policy and public assisance program aciviy. We mus

be careul, or example, ha our analysis is no simply deecing he endency o

more economically vibran saes o adop higher minimum wages. Disinguishingcorrelaion and policy endogeneiy rom rue causal effecs is he primary moivaion

or economeric analysis. In an ideal experimen, researchers would begin wih wo

saessaes ha are alike in every respec prior o he policy and rea only

one o hese saes wih a higher minimum wage. Tey would atemp o shield

his pair o saes rom any influence ha could obscure heir undersanding o he

minimum wages direc effec on program aciviy and hen observe he unperurbed

impac o he wage change on program aciviy.

For beter or worse, researchers canno conduc such experimens. However, we

can use saisical mehods o conrol simulaneously or he independen effecs

o conounding acorsor example, sae employmen condiions, sae income

levels, and amily characerisicson Medicaid aciviy. Furhermore, we can use

common rajecories among saes wihin he same Census division, effecively

limiing our comparisons o groups o saes ha are geographically similar, and

accouning or regional differences across he Unied Saes. By ensuring similariy

along all o hese dimensions, we maximize he likelihood ha program aciviy in

any wo comparison saes would indeed have been comparable in he absence o

a minimum wage change. Tus, i a new minimum wage policy were implemened

in one sae only, we could atribue all o he difference we observe in programaciviy o he new minimum wage policy.

o conrol or ime-varying heerogeneiy among saes, our preerred specificaions

allow each sae o have a separae inercep and linear ime rend. o aciliae

comparison beween regions and ime periods ha are maximally alike, we also


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include separae effecs by Census division and ime. In oher words we approximae

he ideal experimen by using nonexperimenal saisical mehods. Te desirable

pre-exising similariies beween saes ha we have defined above inorm our

choice o conrol variables in a saisical seting. More preciselyin our muliple

regression modelswe use median amily income, he unemploymen rae, he

employmen-o-populaion raio, and regional and ime idenifiers o consruc anappropriae group o peers or each sae on he eve o a policy change.

Model specification

We esimae he effec o he minimum wage on enrollmen in radiional, pre-

ACA Medicaid using amily-level daa on program paricipaion. For amily i

residing in sae s during year t, we esimae an equaion o he ollowing orm:

Yist= + 1 log(MWst) + 2 Xst + 3 Zi + s + dt + s*t + ist (1)

Yist

is a binary variable ha is se equal o 1 i a leas one member o amily iwas

enrolled in Medicaid during he survey year. is a se o sae-level characerisics,

including annual averages o he unemploymen rae, he employmen-o-populaion

raio, and he naural log o median amily income. We also es he effec o including

Medicaid income eligibiliy hresholds or employed and unemployed parens o

dependen childrenexpressed as a percen o he FPLin he vecorXst.

However, he inclusion o hese conrols has no significan effec on our esimaes.

Zi

is a vecor o amily atribues, including indicaors or he race and marial saus

o he amily head, size o he amily, he presence o children, and he presence o

an adul male. Sae fixed effecs are capured by s. o conrol or ime-varying

heerogeneiy, our preerred model specificaion also includes year fixed effecs ha

vary by Census division (dt

); we also es specificaions in which year effecs are

resriced o be he same or all Census divisions. Finally, our preerred model

specificaion includes a linear ime rend or each sae, s*t. Appendix C conains a

discussion o our approach o geographic heerogeneiy over ime and a comparison

o our resuls o hose obained using alernaive ses o conrols.

Te effec o ineres, which is capured by 1, is he expeced change in heprobabiliy o being enrolled in Medicaid wih respec o a change in he log o he

binding minimum wage in sae during year t. Robus sandard errors are clusered

a he sae level. We esimae he parameers using linear regression hus producing

a linear probabiliy model. Deails o he model selecion process are covered in

Appendix C.


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Results

Estimated minimum wage effects on Medicaid enrollment

Te hird column o able 5 displays he esimaes rom our preerred model or

Medicaid enrollmen.28(see Appendix C) Our parameer o inereshe coefficien

o he minimum wage ermindicaes ha a 10 percen increase in he minimum

wage leads o a decrease o abou 31 basis poins, or 0.31 percenage poins, in he

Medicaid enrollmen rae among amilies.29

o pu his esimae in conex, we can compue he change in Medicaid aciviy

prediced or a paricular wage scenario. For example, in Georgiawhere he curren

minimum wage is $7.25he Medicaid enrollmen rae or non-elderly amilies in

2012 was 19.93 percen prior o adjusing or underreporing. Tus, a 10 percen

increase in he minimum wage rom $7.25 o abou $7.98 per hour would have

decreased he share o amilies ha repored paricipaing in Georgias radiional

Medicaid program o 19.65 percena decrease o 28 basis poins, or 1.5 percen.30

o carry ou he policy simulaion below, we subsequenly adjus such calculaed

enrollmen rae predicions or underreporing in he March CPSas described in

Appendix Aand we hen calculae he associaed reducion in Medicaid spending.

In Georgia, he annual expendiure associaed wih his enrollmen reducion is

$39.5 million, nearly 0.5 percen o 2012 Medicaid spending in ha sae.

National and state-level predicted impactsfrom a $10.10 minimum wage

We nex apply our findings o predic how Medicaid aciviy would change i saes

raised heir minimum wages o $10.10 in 2014. In order o make his inerence, weaccoun or he ac ha he curren minimum wage varies by sae. A he beginning

o 2014, 21 saes mainained higher minimum wages han $7.25. Te reducion in

Medicaid aciviy resuling rom a new minimum wage will be greaer in low-wage

saes han in high-wage saes, all else equal. In order o accoun or his properly,


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we calculae he percenage wage change ha would resul rom a $10.10 minimum

wage on a sae-by-sae basis. We hen apply he esimaed parameers rom he

preerred model presened above o compue he expeced decrease in radiional,

pre-ACA Medicaid aciviy or each sae. In his exercise we use saes 2014

minimum wage levels in combinaion wih he laes available daa on Medicaid

enrollmen rom he year 2012.

Workers earning less han $10.10 per hour would no be he only persons affeced

by he minimum wage change. Oher low-wage workers earning somewha above

$10.10 would likely also benefi rom a wage increase. For example, he Congressional

Budge Office, or CBO, recenly projeced ha in addiion o he 17 million workers

who would be making less han $10.10 in 2016and would hereore be direcly

affeced by he policy changeanoher 8 million workers earning beween $10.10

per hour and $11.50 per hour were also likely o experience a wage increase.31Our

esimaes include boh he direc and indirec impacs o he minimum wage on

Medicaid aciviy.

Effects on Medicaid in the nonexpansion states

As discussed previously, more han hal o he saes, as well as Washingon, D.C.,

had chosen o expand heir Medicaid programs under he ACA beginning in January

2014.32Under he expansion, all individuals and amilies wih incomes below 138

percen o he FPL become eligible or Medicaid. Tis higher cuoff level significanly

changes he composiion o he marginally eligible group o Medicaid recipiens

ha is, hose whose incomes are close o he eligibiliy cuoff. Furhermore, because

saes had very differen eligibiliy rules prior o he ACA, he exen o he change

differs by boh amily caegory and sae; or cerain populaions, such as childless

aduls, he expansion exends eligibiliy ar beyond he pre-ACA level.

In saes wih Medicaid programs ha were less generous prior o expansion, he

group o amilies whose incomes are close o 138 percen o he FPL may differ in

imporan ways rom he marginal group whose enrollmen aciviy is examined in

he preceding analysis. For example, hey may differ in labor-orce paricipaion,

earnings profiles, amily srucure, and behavioral responses o wage changes andhealh care access. Families who earn close o he newly expanded eligibiliy cuoffs

may no be affeced by a minimum wage change in he same way as amilies earning

close o he lower eligibiliy ceilings o earlier years.


18/36


However, in saes ha have no ye expanded Medicaid, real incomes o marginally

eligible amilies oday are similar o hose o marginally eligible amilies a he end

o our esimaion period in 2012. For he 24 nonexpansion saes as o January 2014,

we apply he findings o our analysis o examine how Medicaid aciviy would be

affeced when saes joinly enac Medicaid expansion and a minimum wage increase.

In his exercise we use nonexpansion saes 2014 minimum wage levels and heirMedicaid enrollmen and expendiures in 2012he laes year or which our daa

are available.

Key values or he nonexpansion saes are provided in able 1 in he second secion

o his repor. In comparison o expansion saes, nonexpansion saes are dispro-

porionaely likely o mainain lower minimum wages and o be relaively low income.

In all bu 4 o he 24 nonexpansion saesAlaska, Florida, Maine, and Monana

minimum wages are currenly equal o he ederal minimum o $7.25. Te average

minimum wage among hese saes is $7.31, compared o $7.74 in expansion saes.33

A $10.10 hourly minimum wage would hereore represen a pay increase o 39.3percen or minimum wage workers in mos o hese saes. Median annual amily

income or our sample o March CPS amilies was nearly 10 percen greaer in

expansion saes in 2012, averaging $57,096 in nonexpansion saes and $62,780

in expansion saes. Tese economic and labor condiions imply ha a minimum

wage increase would have a greaer impac on boh income and public assisance

expendiures in nonexpansion saes.

However, nonexpansion saes also have less generous Medicaid programs: income

eligibiliy cuoffs are lower and ewer noncaegorically eligible groups are covered.

Tus, iniial enrollmen raes are lower in hese saes and expendiures per parici-

paing amily are less. On average in 2012, nonexpansion saes covered employed

parens up o only 70 percen o he FPL compared o 166 percen in expansion

saes. Income hresholds or unemployed parens were similarly lower: 48 percen

FPL compared o 143 percen o he FPL. Average expendiures per amily or

non-disabled, non-elderly enrollees was abou 9.1 percen lower in nonexpansion

saes han in expansion saes.

able 6 in Appendix D repors he esimaed effecs on pre-ACA Medicaid expendi-

ures ha each nonexpansion sae would experience under a $10.10 minimum wagei ully implemened in 2014. o arrive a hese expendiure changes, we firs compue

enrollmen changes or non-disabled amilies by applying he esimaed minimum

wage parameer rom he preerred regression model, as discussed earlier, o he

naural logarihm o he wage change ha each sae would experience under he


19/36


bill. We hen adjused enrollmen raes or underreporing in he March CPS as

described in Appendix A . Since an increase in he minimum wage would primarily

affec he incomes o he non-disabled and non-elderly, he enrollmen raes are

or non-disabled, non-elderly amilies including children in such recipien amilies.

Non-disabled, non-elderly individuals make up 26.4 percen o enrollees innonexpansion saes and accoun or one-hird o Medicaid spending.34o compue

he change in Medicaid spending resuling rom reduced enrollmen, we assume

ha each saes recen level o spending per non-disabled, non-elderly enrollee

will remain consan beore and afer he policy change.35

able 2 summarizes oal expeced program changes in nonexpansion saes

including Pennsylvaniaunder a $10.10 minimum wage, as well as under several

oher possible wage scenarios. I nonexpansion saes were o implemen he dual

policy package o a $10.10 per hour minimum wage increase and an expansion o

Medicaid in 2014, he shif in amilies rom radiional Medicaid o expansionMedicaid would cause radiional Medicaid expendiures o all by more han $2.5

billion per yeara decrease o 1.5 percen o spending among he nonexpansion

saes and 0.6 percen relaive o overall Medicaid program expendiures.

Pennsylvania, which will expand Medicaid beginning in January o 2015, accouns

or 9.2 percen o his reducion. Excluding Pennsylvania, single-year Medicaid

savings or nonexpansion saes would be nearly $2.3 billion. No surprisingly, he

greaes expendiure reducions come in saes wih large populaions, such as

exas a $537 million, Florida a $204 million, and Norh Carolina a $200 million.

Our calculaion also assumes ha saes will index he minimum wage o he rae

o inflaion. Te FPL, on which Medicaid eligibiliy crieria are based, is also indexed

o inflaion. Consequenly, i nonexpansion saes do no aler heir eligibiliy

hresholds, he savings over 10 years would be 10 imes he single-year savings

approximaely $25.1 billion in odays dollars.36

As noed above, unding or hose who are eligible by virue o he Medicaid

expansion differs rom unding or radiional, pre-ACA Medicaid enrollees. Unlike

radiional Medicaidor which saes pay a subsanial porion o he coss

coss or hose eligible under he expansion are predominaely ederally financed.Tus, while low-income working amilies would mainain access o Medicaid in

he even o a minimum wage increase, he shif in eligibiliy rom radiional o

expansion Medicaid would lead saes o save money on radiional Medicaid.


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Te budgeary savings ha nonexpansion saes

would experience in radiional Medicaid rom

joinly implemening his policy packageha

is, Medicaid expansion along wih a minimum

wage increasecerainly undersae he

economic benefis associaed wih Medicaidexpansion. A recen Whie House repor finds

ha saes will obain subsanial economic

benefis rom expanding Medicaid.37For

example, he savings above do no accoun or

he cos ha uninsurance currenly imposes on

saes and localiies. Uninsured individuals are

much less likely han he insured o pay or

healh care services received, and are more likely

o make greaer use o comparaively expensive

emergency services. Te coss o uncompen-saed care are parially unded by sae and local

dollars.38Individuals who are currenly ineligible or Medicaid bu canno afford

insurance make up a large porion o he uninsured. Many such individuals would

become insured under Medicaid expansion when coverage is available or hose

wih incomes up o 138 percen o he FPL. Saes would bear no coss rom such

newly eligible individuals in he firs hree years afer expansionand never more

han 10 percen o coss hereaferbu would benefi rom reducions in he

social cos o uninsurance.

Te policy simulaion above also omis oher indirec sources o savings. Muliple

sudies indicae ha he effecs o Medicaid expansion on job creaion and sae ax

revenues could be subsanial. A 2012 Virginia sudy suggesed ha such macro-

economic effecs would resul in economic benefis o $1.33 billion o Virginia over

he period rom 2010 o 2022, nearly five imes he $280 million cos or expanding

he program over he same period.39

Finally, publiciy abou changes under he ACA, as well as recruiing sraegies o

enroll amilies who are newly eligible or he Medicaid program, have resuled in

addiional enrollmens among amilies who were previously eligible ye unenrolledin boh expansion and nonexpansion saes. Te Medicaid lieraure ofen reers o

his enrollmen increase as he woodwork effec, indicaing amilies who come

ou o he woodwork o ake up Medicaid programs or which hey were already

eligible.40Te woodwork effec is already eviden in boh expansion and nonex-

TABLE 2

Summary of traditional Medicaid expenditures innonexpansion states under wage scenarios

If nonexpansion

states had minimum

wages of:

Expenditures

(in millions of dollars)

Predicted Change

Recent levels (2012) $165,856

$7.25 $165,909 $53

$8.00 $165,149 -$707

$9.00 $164,240 -$1,616

$10.00 $163,427 -$2,429

$10.10 $163,350 -$2,506

$11.00 $162,691 -$3,164

Note: Calculations assume constant spending per non-aged, nondisabled enrollee remains the sain each state before and after the minimum-wage change. Enrollment is adjusted for underreportin the March CPS, as described in Section 2.


21/36


pansion saes.41By virue o he individual mandae, media atenion, and oureach

effors, enrollmen jumped during he firs hal o 2014 in mos o he nonexpansion

saes.42Alogeher, he Medicaid and Childrens Healh Insurance Program, or CHIP,

enrollmen in hese 24 saes climbed by 975,000 enrollmens, including increases

o 16 percen in Georgia, 10 percen in Monana, and 9 percen in Idaho.43A

minimum wage increase would hus reduce he burden o he woodwork effec inhe nonexpansion saes. I saes were o raise heir minimum wages and expand

Medicaid, woodworkers who los eligibiliy or radiional Medicaid could nonehe-

less access affordable healh coverageeiher by qualiying or Medicaid under

he expansion or qualiying or financial assisance in he markeplacesand a a

cheaper rae or saes han under radiional, pre-ACA Medicaid. For his reason

and ohers, he findings in his repor can be viewed as a conservaive esimae o

he expendiure reducion ha would resul rom higher minimum wages.


22/36


Conclusion

Using 15 years o variaion in sae and ederal minimum wages, we find ha

minimum wage increases lead o reducions in radiional Medicaid enrollmen

among amilies. We apply our resuls o predic he effec o a $10.10 per hour

minimum wage in he 24 saes ha had no ye expanded Medicaid under he

ACA as o January 2014. A minimum wage increase would shif some amilies

rom eligibiliy under saes radiional Medicaid programs o he expansion

caegory or which unding is predominaely provided by he ederal governmen.

I he minimum wage were increased o $10.10 per hour we esimae ha saesavings or radiional Medicaid in nonexpansion saes would be approximaely

$2.5 billion per year, or $25.1 billion over he coming decade. Tese savings

represen more han 1.5 percen o Medicaid spending among nonexpansion

saes and 0.6 percen relaive o all 2012 Medicaid expendiures.

Te minimum wage represens a low-cos, high-benefi policy opion o complemen

Medicaid expansion. Tis dual policy package would no only boos income and

increase access o healh care among low-wage working amilies, bu would also

provide a boon o sae budges.


23/36


About the authors

Rachel Westis a Senior Policy Analys a he Cener or American Progress. She

holds a masers degree in public policy rom he Goldman School o Public

Policy, Universiy o Caliornia, Berkeley, and a bachelor o ars rom Moun

Holyoke College. Her research ocuses on economic policy in he areas o low-wage labor and povery.

Michael Reichis proessor o economics and direcor o he Insiue or Research

on Labor and Employmen a he Universiy o Caliornia, Berkeley. His research

publicaions cover numerous areas o labor economics, including racial inequaliy,

labor-marke segmenaion, high-perormance workplaces, union-managemen

cooperaion, Japanese labor-managemen sysems, living wages, and minimum

wages. He received his docorae in economics rom Harvard Universiy.

Acknowledgments

We are graeul o Melissa Boeach, Zachary Goldman, Hilary Hoynes, Ken Jacobs,

Laurel Lucia, Ben Olinsky, and Jesse Rohsein or heir valuable suggesions.


24/36


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Davidoff, Amy, Alshadye Yemane, and EmeraldAdams. 2005. Healh Coverage or Low-Income Aduls: Eligibiliy and Enrollmen inMedicaid and Sae Programs, 2002. Oakland,CA: Kaiser Commission on Medicaid andhe Uninsured.

Dube, Arindraji. 2013. Minimum Wages and heDisribuion o Family Income. UnpublishedWorking Paper. Available a htps://dl.dropboxuserconen.com/u/15038936/Dube_MinimumWagesFamilyIncomes.pd.

Holahan, John, and Bowen Garret. 2010. TeCos o Uncompensaed Care wih and wihouHealh Reorm. Washingon: Urban Insiue.

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Park, Edwin. 2014. CBO Finds Healh ReormsMedicaid Expansion Is an Even Beter Dealor Saes. Washingon: Cener on Budgeand Policy Prioriies.

Social Securiy Adminisraion. 2013.AnnualStatistical Supplement on the Social Security

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Sommers, Ben, and ohers. 2012. Undersand-ing Paricipaion Raes in Medicaid:Implicaions or he Affordable Care Ac.Washingon: Deparmen o Healh andHuman Services.

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. 2014. Medicaid per Enrollee Spending:Variaion across Saes. Oakland, CA.Available a htp://kaiseramilyoundaion.files.wordpress.com/2014/02/8550-medic-aid-per-enrollee-spending-variaion-across-saes1.pd.

.2013. Federal and Sae Share o

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. 2014. Saus o Sae Acion on heMedicaid Expansion Decision, 2014.(htp://kff.org/medicaid/sae-indicaor/sae-aciviy-around-expanding-medicaid-under-he-affordable-care-ac[Augus, 2014]).

. 2014. Te Coverage Gap: UninsuredPoor Aduls in Saes ha Do No ExpandMedicaid. Oakland, CA. Available a htp://

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medicaid.pd .Wage and Hours Division.2014. Minimum Wage Laws in he Saes January 1, 2014. U.S. Deparmen o Labor(htp://www.dol.gov/whd/minwage/america.hm [February 2014]).

Wes, Rachel, and Michael Reich. 2014. TeEffecs o Minimum Wages on SNAP

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Appendix A:

Underreporting in the March CPS

As noed above, i is well known ha repored benefis in he March CPS are subsan-

ially lower han enrollmen daa in adminisraive sources.44A recen Rober Wood

Johnson Foundaion sudy esimaed a 31.4 percen undercoun in he 2001 CPS.45

Te undercoun was somewha smaller or lower-income amilies. Te underrepor-

ing o benefis in he CPS has increased over ime: Te raio o repored benefis o

adminisraive benefis ell rom 0.73 in 1990 o 0.54 in 2007.46Lower reporing raes

in recen yearswhen sae-level minimum wage increases have been requen and

have ended o be largercould pose a hrea o our ideniying sraegy. Teallowance we make or sae-level linear ime rends counerbalance his concern.

Insoar as paricipaion in Medicaid is being underrepored, he esimaed elasiciies

rom he regression analysis presened below will be represenaive or reporing

amilies only. However, so long as reporing error is no sysemaically relaed o

he sae-level minimum wage or is correlaes, our esimae o he effec o ineres

will no be biased. I he undercoun in he March CPS is relaively consan over

ime and by sae, our regression esimaes will no be affeced because we esimae

changes in enrollmen raher han levels. Unorunaely, he undercoun lieraure

does no indicae clearly wheher Medicaid undercouns vary by sae and over

ime. I hey do vary, however, hese changes will likely be absorbed by our conrols

or sae-specific rends.

For purposes o he policy simulaions below, we address underreporing by

applying parameer esimaes o sae-level adminisraive oals raher han survey

daa oals. For he Medicaid program, we use inormaion daa compiled by he

Henry J. Kaiser Family Foundaion on he number o non-aged individuals ever

enrolledha is, enrolled or a leas one dayduring 2010, he laes year or

which daa are available. By comparing his number o weighed March CPS oalsor he same year, we compue an underreporing raio or each sae. Assuming ha

his raio remains consan beween 2010 and 2012, we scale up he March CPS

enrollmen raes or each sae accordingly o accoun or underreporing. Using

hese mehods, we esimae ha he March CPS had a reporing raio o 74.6 percen

or Medicaid enrollmen. Te average sae had a reporing raio o 77.8 percen.


27/36


Appendix B:

Pre-trend falsification test

Recen minimum wage research highlighs a common flaw in previous sudies:

ailure o veriy ha he oucome variable is ree o negaive pre-exising rends in

he dependen variable.47I, or example, program enrollmen were already

declining in saes ha raised heir minimum wages beore he minimum wage

changes came ino effec, hen a sandard regression analysis wih sae and ime

fixed effecs could, misakenly, atribue ha reducion o he minimum wage. We

check or such pre-exising rends by inroducing variables ha represen he

subsequen years value, or lead, o he minimum wage. I he model esimaes heminimum wage o have an effec on he oucome variable beore he wage change

wen ino effec, hen an unobserved acor, no he minimum wage change,

caused he change in program aciviy.

We es he Medicaid specificaions or pre-rends by including a one-year lead o

he minimum wage. able 3 displays he effec o including he lead in regression

specificaions 1, 2, and 3, all o which conain a ull se o conrol variables. In

none o he hree specificaions does he leading minimum wage erm atain

saisical significance: he sandard errors are larger han he leading coefficien

esimaes in all hree specificaions. We noneheless have some concerns abou

specificaion 1: Te magniude o he leading coefficien is close o ha o he

concurren wage and is negaive in sign, possibly suggesing a pre-exising down-

ward rend. Moving across he columns o able 3 o increasingly sauraed

specificaions, he concurren minimum wage regains is saisical precision in he

presence o local conrols and he lead erm becomes iny, imprecise, and posiive.

Tis observaion suppors our preerence or specificaion 3: Te concurren

minimum wageraher han he wage level in subsequen periodsunderlies he

changes in Medicaid enrollmen.


28/36


TABLE 3

Pre-trends test on leading coefficients: Medicaid enrollment

(1) (2) (3)

Log minimum wage 0.0142 -0.0144 -0.0303**

(0.0191) (0.0145) (0.0143)

One-year lead of log minimum wage -0.0129 -0.0081 -0.0041

(0.0178) (0.0174) (0.0177)

N 806,075 806,075 806,075

State fixed effects Y Y Y

Year fixed effects Y

Division x year fixed effects Y Y

State-specific linear trends Y

* p


29/36


Appendix C:

Model estimation process

Following he process suggesed by he minimum wage lieraure, and described

in Te Effecs o Minimum Wages on SNAP Enrollmens and Expendiures, we

es hree mehods o conrol or unobserved geographic- and ime-varying

characerisics ha migh influence public assisance aciviy.48Firs, we include

only independen sae-specific fixed effecs and year-specific fixed effecs. Tis

specificaionspecificaion 1implicily assumes ha amilies in any sae

consiue an equally good saisical conrol group or hose in any randomly

chosen sae afer accouning or various characerisics such as median incomeand unemploymen rae, among ohers. Similarly, simple ime fixed effecs assume

ha amilies surveyed in any year can credibly serve as a conrol group or amilies

surveyed in every oher year o he sample.

In oher words, specificaion 1 assumes ha a saes immediae neighbor provides

no beter a couneracual or he effec o a minimum wage change han does a

sae across he counry. We relax his resricive specificaion in wo seps. In

specificaion 2, we replace simple year fixed effecs wih fixed effecs or each Census

division-year combinaion. By using division-year effecs, we remove he assumpion

ha amilies in each sae are equally good saisical conrols or all oher amilies.

Raher, we allow or he possibiliy ha amilies in similar geographic regions

or example, he Souh, or he Norheasmay be more similar o one anoher

han amilies arher away. Finally, in specificaion 3, we add sae-specific ime

rends o he previous specificaion. Tus, specificaion 3 allows each sae o have

is own ime-varying rends raher han imposing he resricion ha saes evolve

idenically over he many years in he sample. Specificaion 3 is he mos rigorous

model specificaion in ha i allows or heerogeneiy along hree dimensions.

We begin building each o he specificaions above rom a simple uncondiionalmodel, regressing Medicaid enrollmen on he log o he minimum wage and he

se o geographic- and ime-specific effecs paricular o specificaions 1, 2, or 3

above. able 4 displays his process or he case o specificaion 3; he firs column

o his able conains he uncondiional esimaion. We hen add covariaes


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sequenially o hese models. Tese covariaes include firs he vecor o amily-

level conrolssuch as amily size, race and ehniciy, and marial sausollowed

by each o several sae-level covariaes in urn: he unemploymen rae, log o

median amily income, and he employmen-o-populaion raio.

As anicipaed, he uncondiional models sugges ha he relaionship beween heminimum wage and Medicaid enrollmen is a more complex one han is capured

by simple correlaion, perhaps influenced by oher acors. In he uncondiional

model, he coefficien on he variable o inereshe log o he minimum wage

is no saisically differen rom zero, and is o rivial magniude. However, once

we accoun or he influence o labor-marke condiions and variaion in income

levels on program paricipaionby including unemploymen rae and median

amily income conrol variables, respecivelyhe effec o he minimum wage on

Medicaid enrollmen is precisely esimaed. Tese resuls indicae ha including

he seleced conrols improves idenificaion o he independen effec o he

minimum wage on Medicaid enrollmen separae rom variaion inroduced byconounding acors. Furhermore, he minimum wage coefficien increases some-

wha in pracical imporance: In specificaion 3, or example, he coefficien grows

in magniude rom -0.0272 o -0.0306. Similar resuls are obained or specifica-

ions 1 and 2, leading us o preer a ull se o covariaes o less resriced models.

Having setled on a se o exernal conrol variables, we reurn o he oher dimension

o model selecionhe choice among specificaions 1, 2, and 3. able 5 compares

he primary coefficiens o ineres in each o he hree alernaive effecs specifica-

ions, esimaed using he ull se o conrol variables discussed above. Minimum

wage effec sizes are smalles or specificaion 1, inermediae or specificaion 2,

and larges in specificaion 3. Wih he excepion o he unemploymen rae

which has a enuous link o Medicaid eligibiliy, bu serves o conrol or changes

in he saes economic climaeshe sandard errors on he variables are much

smaller in specificaions 2 and 3 han in specificaion 1. On he basis o coefficien

significance, boh join and individual, specificaion 3 is sricly preerred o

specificaion 1, which consrains each sae and each period o serve as conrols

or all oher saes and all oher ime periods, respecively, and o specificaion 2,

which does no allow saes oucomes o exhibi separae rajecories over ime.

One concern wih specificaion 3 is ha rend conrols, such as sae-specific

linear rends, may incorrecly absorb some o he delayed impac o a minimum

wage.49When we es his issue by including lagged minimum wages, we do no

find ha delayed effecs are significan. Anoher concern wih more sauraed


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models is ha hey use less o he variaion in he daa, which could reduce he

saisical power o he resuls. However, here is no evidence o his issue in our

resuls. On he conrary, in moving rom specificaion 2 o specificaion 3 in able

5, he inclusion o sae linear rends yields a coefficien esimae ha is boh larger

in magniude and more saisically precise. In addiion o he superioriy o

specificaion 3 rom a saisical sandpoin, he imporance o consrucingappropriae comparison groups by employing a maximally flexible se o local

conrolsas poined ou by economis Sylvia Allegreto and her colleagues

leads us o conclude ha specificaion 3 is mos credible.50

TABLE 4

Medicaid enrollment (family-level, linear probability model)

(3a) (3b) (3c) (3d) (3e)

Log minimum wage -0.0272 -0.0275 -0.0277 -0.0296* -0.0306*

(0.0202) (0.0165) (0.0166) (0.0167) (0.0171)

Unemployment rate (/100) -0.0118 -0.0950 -0.1359

(0.1384) (0.1369) (0.1503)

Log median income -0.0549*** -0.0509***

(0.0159) (0.0158)

Employment-to-population ratio -0.0873

(0.0582)

N 866,355 866,355 866,355 866,355 866,355

* p


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TABLE 5

Comparison of specifications: Medicaid enrollmentat the family-level, linear probability model

(1) (2) (3)

Log minimum wage -0.0023 -0.0238 -0.0306*

(0.0191) (0.0158) (0.0171)

Unemployment rate (/100) -0.1657* -0.1425 -0.1359

(0.0934) (0.1391) (0.1503)

Log median income -0.0493** -0.0365* -0.0509***

(0.0242) (0.0208) (0.0158)

Employment-to-population ratio -0.0675 -0.1048 -0.0873

(0.0728) (0.0636) (0.0582)

N 866,355 866,355 866,355

State fixed effects Y Y Y

Year fixed effects Y

Division x year fixed effects Y Y

State-specific linear trends Y

* p


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Appendix D:

Policy simulation resultsA $10.10 minimum wage in nonexpansion states

TABLE 6

Predicted changes to traditional Medicaid expenditures in nonexpansion states under a $10.10 minimum wage

State

Minimum wage in

2014

Expenditures

Percent spending on

non-disabled, non-elderly

2012 estimated change

( in mil li ons of dol lars) Percent est imated cha

Alabama $7.25 33.1% -$66.0 -1.31%

Alaska $7.75 44.6% -$26.3 -1.89%

Florida $7.67 26.8% -$204.0 -1.12%

Georgia $7.25 32.9% -$137.5 -1.67%

Idaho $7.25 27.9% -$20.6 -1.35%

Kansas $7.25 25.2% -$34.7 -1.34%

Louisiana $7.25 31.7% -$75.9 -1.09%

Maine $7.50 17.5% -$12.6 -0.53%

Mississippi $7.25 26.6% -$40.5 -0.91%

Montana $7.65 34.8% -$16.2 -1.61%

Nebraska $7.25 32.9% -$45.0 -2.46%

North Carolina $7.25 37.1% -$200.4 -1.66%

Oklahoma $7.25 41.0% -$76.6 -1.65%

South Carolina $7.25 37.2% -$87.5 -1.84%

South Dakota $7.25 32.3% -$14.6 -1.92%

Tennessee $7.25 39.9% -$136.1 -1.56%

Texas $7.25 41.0% -$537.0 -1.94%

Wisconsin $7.25 31.0% -$90.5 -1.29%

Wyoming $7.25 27.9% -$10.0 -1.87%

Indiana $7.25 26.0% -$94.2 -1.16%

Missouri $7.25 35.8% -$162.3 -1.84%

Pennsylvania $7.25 26.6% -$231.5 -1.14%

Utah $7.25 43.3% -$41.3 -2.18%

Virginia $7.25 31.8% -$144.3 -2.06%

Note: To estimate expenditures, family enrollment rates are adjusted for CPS undercounting, as described in text.

Sources: Authors estimates based on Bureau of Labor Statistics, March Current Population Survey (Washington: Bureau of Economic Analysis, 2014), available at http://www.bls.gov/cps/; U.S. Department of LaChanges in Basic Minimum Wages in Non-farm Employment Under State Law: Selected Years 1968 to 2013, available at www.dol.gov/whd/state/stateMinWageHis.htm (last accessed July 2014); Bureau of Eco

Analysis, National I ncome and Product Accounts, Table SA35; The Henry J. Kaiser Family Foundation, Medicaid per Enrollee Spending: Variation Across States, available at www.kff.org/report-section/medicaidenrollee-spending-variation-across-states-appendices-8550 (last accessed July 2014).


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Endnotes

1 In August of 2014, Pennsylvania Gov. Tom Corbett (R)expanded Medicaid under a Section 1115 waiver.However, as discussed further below, Pennsylvania isincluded among nonexpansion states for purposes ofthis analysis because its Medicaid expansion will nottake effect until January 2015. The Henry J. KaiserFamily Foundation, Status of State Action on theMedicaid Expansion Decision, available at http://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act(last accessed August 2014).

2 The Henry J. Kaiser Family Foundation, Status of StateAction on the M edicaid Expansion Decision.

3 In most states, the income eligibility thresholds fornon-elderly, non-disabled adults differ by employmentand parenting status.

4 Sylvia Allegretto and others, Fast Food, Poverty Wages:The Public Cost of Low-Wage Jobs in the Fast-FoodIndustry (Berkeley, California: University of California,Berkley Center for Labor Research and Education,2013), available at http://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdf.

5 West and Reich, The Effects of Minimum Wages onSNAP Enrollments and Expenditures.

6 Ibid.

7 Arindrajit Dube, Minimum Wages and the Distributionof Family Income. Unpublished Working Paper (2013),available at dl.dropboxusercontent.com/u/15038936/Dube_MinimumWagesFamilyIncomes.pdf.

8 Ibid.

9 Aaron Yelowitz, Did Recent Medicaid Reforms Causethe Caseload Explosion in the Food Stamps Program?Working Paper 756 (University of California, LosAngeles Department of Economics, 1996), available athttp://www.econ.ucla.edu/workingpapers/wp756.pdf.

10 Katherine Baicker and others, The Impact of Medicaid

on Labor Market Activity and Program Participation:Evidence from the Oregon Health InsuranceExperiment,American Economic Review: Papers &Proceedings104 (5) (2014): 322328.

11 Allegretto and others, Credible Research Designs forMinimum Wage Studies.

12 David Neumark and William Wascher, EmploymentEffects of Minimum and Subminimum Wages: Panel Dataon State Minimum Wage Laws, Industrial and LaborRelations Review 46 (1) (1992): 5581, available at http://www.uh.edu/~adkugler/Neumark%26Wascher.pdf.


14 The Henry J. Kaiser Family Foundation, Federal andState Share of Medicaid Spending, available athttp://

www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/ (last accessed August 2014).

15 Ibid.

16 As of 2012, the final year of the data in this study,categorically eligible groups included children underthe age of 19 whose family income was at or below thefederal poverty level, or FPL, and 133 percent of the FPLfor children under 6; SSI recipients, primarily those whoare disabled; families with children meeting therequirements for the program formally known as Aid toFamilies with Dependent Children, or AFDC; pregnant

women with incomes at or under 133 percent of theFPL and their infants; and specific low-income Medicarebeneficiaries. For a full list of mandatory categoricallyneedy groups, see Medicaid, List of Medicaid EligibilityGroups: Mandatory Categorically Needy(2014See ng:Variation across States.HAN PRESS RELEASEno: 2010),available at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdf.

17 Centers for Medicare & Medicaid Services,A Profile ofMedicaid: Chartbook 2000(U.S. Department of Healthand Human Services, 2000), available athttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdf.

18 Social Security Administration,Annual Statistical Supple-ment on the Social Security Disability Insurance Program(2013), available at www.socialsecurity.gov/policy/docs/statcomps/supplement/2013/medicaid.pdf.

19 For a more complete discussion, see Ben Sommersand others, Understanding Participation Rates inMedicaid: Implications for the Affordable Care Act(U.S. Department of Health and Human Services, 2012),available at http://aspe.hhs.gov/health/reports/2012/medicaidtakeup/ib.pdf.

20 The Henry J. Kaiser Family Foundation, Status of StateAction on the Medicaid Expansion Decision.

21 Ibid.

22 Ibid.

23 Ibid.

24 Medicaid changed significantly in 1997, when thepassage of Title XXI of the Social Security Act createdthe Childrens Health Insurance Plan, or CHIP. We restrictour analysis to the period immediately following thischange. We have also tested the sensitivity of our resultsto starting the sample period two years before and after1998. These adjustments do not substantially chang e

our results.

25 We depart from the U.S. Bureau of the Census definitionof a family unit, which is two people or more (one ofwhom is the householder) related by bir th, marriage, oradoption and residing together. See U.S. Bureau of theCensus, Current Population Survey (CPS) - Definitions,available at http://www.census.gov/cps/about/cpsdef.html (last accessed February 2014). We count as a familyunit any individual residing on his or her own; two ormore persons residing together who do not belong toa family in the March CPS sample are constructed as onefamily in our analysis. Our expanded family definitionthus includes these individuals and households, andmakes our analysis more representative of the overallpopulation.

26 We obtained income eligibility information for thesetwo groups from Table 3 of the annual Henry J. Kaiser

Family Foundation, or KFF, reports. Surveys wereconducted for the years 2002 through 2012 (inclusive),with the exception of 2007 and 2010. Eligibility caps fornon-survey years were constructed using data in thepreceding and succeeding years, and informationavailable in the footnotes of the KFF reports for theseyears. See The Henry J. Kaiser Family Foundation,Annual Updates on Eligibility Rules, Enrollment andRenewal Procedures, and Cost-Sharing Practices inMedicaid and CHIP (20002012), available athttp://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/; The Henry J. Kaiser FamilyFoundation, Medicaid per Enrollee Spending: Variation
http://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-acthttp://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-acthttp://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-acthttp://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdfhttp://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdfhttp://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://kff.org/medicaid/report/annual-updates-on-eligibility-rules-enrollment-and/http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/TheChartSeries/downloads/2tchartbk.pdfhttp://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/Downloads/List-of-Eligibility-Groups.pdfhttp://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/http://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdfhttp://laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdfhttp://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-acthttp://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-acthttp://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act


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across States (2014), http://kaiserfamilyfoundation.files.wordpress.com/2014/02/8550-medicaid-per-enrollee-spending-variation-across-states1.pdf.

27 These two measures do not exhaustively capturevariation in states practices. However, to the extentthat states with generous Medicaid programs in thesetwo respects are also generous to Medicaid-eligiblepopulations in other respects, the eligibility thresholdvariables make useful proxies for overall Medicaidprogram generosity in each state. Importantly, includingthese threshold variables does not restrict the data

sample to employed and unemployed parents, but issimply intended to capture two important sources ofprogrammatic variation across states and time.

28 As noted above, we also tested models that includedincome eligibility thresholds for each state-year. Inclusionof these variables had no effect on other parameterestimates, and therefore no impact on inference.

29 That is, the precise predicted Medicaid decrease can befound by multiplying the estimated coefficient of 0.301by the following calculated quantity: ln(new minimumwage)-ln(initial minimum wage). For small minimumwage increases, this calculated quantity is closelyapproximated by the percent increase in the minimumwage. For states that have a minimum wage of $7.25per hour, for examplea 10 percent increase in thewage to $7.98the predicted Medicaid enrollmentdecrease would be: 0.301*[ln($7.98)-ln($7.25)] = 0.292

percentage points. Basis points are a commonly usedmeasure of the change in percentage points; one basispoint is equal to one hundredth of a percentage point.

30 The minimum wage coefficient in the linear probabilitymodel predicts the percentage-point change in theprobability that at least one member of a particularfamily will be enrolled in Medicaid, with respect to achange in the n atural log of the minimum wage. Whenapplied over a large number of families we are able todraw upon the law of iterated expectations, and interpretthe estimated coefficient as a decrease in the mean ofenrollmentthat is, a decrease in the enrollment rate.

31 Congressional Budget Office, The Effects of a MinimumWage Increase on Employment and Family Income(2014).

32 The Henry J. Kaiser Family Foundation, Status of State

Action on the Medicaid Expansion Decision.

33 In this and subsequent comparisons of expansion andnonexpansion states, unless noted otherwise, states areweighted according to the number of resident families.

34 We draw upon data from fiscal year 2010 compiled bythe Henry J. Kaiser Family Foundation to separateenrollment and spending into four groups: aged,disabled, adults, and children. See The Henry J. KaiserFamily Foundation, Medicaid per Enrollee Spending:Variation across States (2014), http://kaiserfamilyfoun-dation.files.wordpress.com/2014/02/8550-medicaid-per-enrollee-spending-variation-across-states1.pdf.

35 Federal Medical Assistance Percentages, or FMAPs, thepercentage of Medicaid expenditures for which thefederal government reimburses states, do change fromyear to year, but the changes are based primarily on per

capita income, and are not substantial.

36 Excluding Pennsylvania, total expenditure reduction innonexpansion states over one decade would be about$22.7 billion.

37 Council of Economic Advisers, Missed Opportunities: TheConsequences of State Decisions Not to Expand Medicaid(Executive Office of the President, 2014), available atwww.whitehouse.gov/sites/default/files/docs/missed_opportunities_medicaid.pdf.

38 An Urban Institute study estimated that 18.5 percent ofthe costs of uncompensated care$10.6 billion in theyear 2008was borne by state and local governments.See John Holahan and Bowen Garrett, The Cost ofUncompensated Care with and without Health Reform(Washington: Urban Institute, 2010), available at http://www.urban.org/UploadedPDF/412045_cost_of_un-compensated.pdf.

39 Ibid., Table 2.

40 See, for example, Aaron Carroll, The Woodwork

Problem and the Medicaid Expansion, AcademyHealthBlog, July 11, 2013, available at blog.academyhealth.org/the-woodwork-problem-and-the-medicaid-expan-sion.

41 See, for example, Jason Millman, These states rejectedObamacares Medicaid expansion, but Medicaid isexpanding there anyway, The Washington Post Wonk-blog,May 13, 2014, available at www.washingtonpost.com/blogs/wonkblog/wp/2014/05/13/these-states-rejected-obamacares-medicaid-expansion-but-medicaid-is-expanding-there-anyway/.

42 Margot Sanger-Katz, Medicaid Rolls Are Growing Evenin States That Rejected Federal Funds, New York Times,August 11, 2014, available at http://www.nytimes.com/2014/08/12/upshot/medicaid-rolls-are-growing-even-in-states-that-rejected-federal-funds.html.

43 Centers for Medicare & Medicaid Services, Medicaid &CHIP: June 2014 Monthly Applications, EligibilityDeterminations and Enrollment Report (2014),available at http://medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/June-2014-Enrollment-Report.pdf.

44 The problem of underreporting could not necessarilybe circumvented by drawing upon alternative datasources: Meyer et al. (2009) report that similar under-reporting is present across four other householddatasets and nine other transfer programs.

45 Robert Wood Johnson Foundation, Why Do HouseholdSurveys Undercount Medicaid Enrollment? (2011),available at http://www.rwjf.org/content/dam/farm/reports/program_results_reports/2011/rwjf69432.

46 The problem of underreporting could not necessarily

be circumvented by drawing upon alternative datasources: Similar underreporting is present across fourother household datasets and nine other transferprograms. See Bruce Meyer, Wallace Mok, and JamesSullivan, The Under-Reporting of Transfers inHousehold Surveys: Its Nature and Consequences.Working Paper 15181 (National Bureau of EconomicResearch, 2009).

47 See, for example, Sylvia Allegretto and others, CredibleResearch Designs for Minimum Wage Studies. WorkingPaper 148-113 (University of California, Berkeley,Institute for Research on Labor and Employment, 2013),available at http://www.irle.berkeley.edu/workingpapers/148-13.pdf.

48 West and Reich, The Effects of Minimum Wages onSNAP Enrollments and Expenditures.

49 Justin Wolfers, Did Unilateral Divorce Laws RaiseDivorce Rates? A Reconciliation and New Results,American Economic Review96 (5) (2006): 18021820.

http://www.rwjf.org/content/dam/farm/reports/program_results_reports/2011/rwjf69432http://www.rwjf.org/content/dam/farm/reports/program_results_reports/2011/rwjf69432http://www.irle.berkeley.edu/workingpapers/148-13.pdfhttp://www.irle.berkeley.edu/workingpapers/148-13.pdfhttp://www.irle.berkeley.edu/workingpapers/148-13.pdfhttp://www.irle.berkeley.edu/workingpapers/148-13.pdfhttp://www.rwjf.org/content/dam/farm/reports/program_results_reports/2011/rwjf69432http://www.rwjf.org/content/dam/farm/reports/program_results_reports/2011/rwjf69432


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