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Public Health Insurance and Private Savings

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Author Info
Jonathan Gruber
Aaron S. Yelowitz

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Abstract

Recent theoretical work suggests that means and asset-tested social insurance programs can explain the low savings of lower income households in the U.S. We assess the validity of this hypothesis by investigating the effect of Medicaid, the health insurance program for low-income women and children, on savings behavior. We do so using data on asset holdings from the Survey of Income and Program Participation, and on consumption from the Consumer Expenditure Survey, matched to information on the eligibility of each household for Medicaid. Exogenous variation in Medicaid eligibility is provided by the dramatic expansion of this program over the 1984-1993 period. We document that Medicaid eligibility has a sizeable and significant negative effect on wealth holdings; we estimate that in 1993 the Medicaid program lowered wealth holdings by 17.7% among the eligible population. We confirm this finding by showing a strong positive association between Medicaid eligibility and consumption expenditures; in 1993, the program raised consumption expenditures among eligibles by 5.2%. We also exploit the fact that asset testing was phased out by the Medicaid program over this period to document that these Medicaid effects are much stronger in the presence of an asset test, confirming the importance of asset testing for household savings decisions.

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Publisher Info
Paper provided by Northwestern University/University of Chicago Joint Center for Poverty Research in its series JCPR Working Papers with number 42.

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Date of creation: 01 Sep 1998
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Handle: RePEc:wop:jopovw:42

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Currie, Janet & Gruber, Jonathan, 1996. "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 431-66, May. [Downloadable!] (restricted)
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  2. Aaron Yelowitz, 1995. "The Medicaid Notch, Labor Supply and Welfare Participation: Evidence from Eligibility Expansions," UCLA Economics Working Papers 738, UCLA Department of Economics. [Downloadable!]
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  3. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
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  4. Starr-McCluer, Martha, 1996. "Health Insurance and Precautionary Savings," American Economic Review, American Economic Association, vol. 86(1), pages 285-95, March.
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  5. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
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  6. Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
  7. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  8. Christopher D. Carroll & Andrew A. Samwick, 1995. "How Important is Precautionary Saving?," NBER Working Papers 5194, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November. [Downloadable!] (restricted)
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  10. Patricia M. Anderson & Bruce D. Meyer, 1995. "The Incidence of a Firm-Varying Payroll Tax: The Case of Unemployment Insurance," NBER Working Papers 5201, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Elizabeth T. Powers, 1995. "Does means-testing welfare discourage saving? Evidence from the National Longitudinal Survey of Women," Working Paper 9519, Federal Reserve Bank of Cleveland. [Downloadable!]
  12. Cutler, David M & Gruber, Jonathan, 1996. "The Effect of Medicaid Expansions on Public Insurance, Private Insurance, and Redistribution," American Economic Review, American Economic Association, vol. 86(2), pages 378-83, May. [Downloadable!] (restricted)
  13. Laurence J. Kotlikoff & John B. Shoven & Avia Spivak, 1987. "Annuity Markets, Savings, and the Capital Stock," NBER Chapters, in: Issues in Pension Economics, pages 211-236 National Bureau of Economic Research, Inc. [Downloadable!]
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  14. Richard T. Curtin & Thomas Juster & James N. Morgan, 1989. "Survey Estimates of Wealth: An Assessment of Quality," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 473-552 National Bureau of Economic Research, Inc. [Downloadable!]
  15. Laurence J. Kotlikoff, 1986. "Health Expenditures and Precautionary Savings," NBER Working Papers 2008, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-42, February. [Downloadable!] (restricted)
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  17. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July. [Downloadable!] (restricted)
  18. Feldstein, Martin S, 1982. "Social Security and Private Saving: Reply," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 630-42, June. [Downloadable!] (restricted)
  19. Jonathan Gruber & Brigitte C. Madrian, 1994. "Health insurance and job mobility: The effects of public policy on job-lock," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 48(1), pages 86-102, October.
  20. Leimer, Dean R & Lesnoy, Selig D, 1982. "Social Security and Private Saving: New Time-Series Evidence," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 606-29, June. [Downloadable!] (restricted)
  21. Janet Currie, 1995. "Do Children of Immigrants Make Differential Use of Public Health Insurance?," NBER Working Papers 5388, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct. [Downloadable!] (restricted)
  23. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-91, September. [Downloadable!] (restricted)
  24. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
  25. Janet Currie & Jonathan Gruber, 1994. "Saving Babies: The Efficacy and Cost of Recent Expansions of Medicaid Eligibility for Pregnant Women," NBER Working Papers 4644, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  27. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 391-430, May. [Downloadable!] (restricted)
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  28. Mark Kazarosian, 1993. "Precautionary Savings- A Panel Study," Boston College Working Papers in Economics 247, Boston College Department of Economics.
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  29. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
  30. Jonathan Gruber & Alan B. Krueger, 1991. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 111-144 National Bureau of Economic Research, Inc. [Downloadable!]
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  31. R. Glenn Hubbard & Kenneth L. Judd, 1987. "Social Security and Individual Welfare: Precautionary Saving, LiquidityConstraints, and the Payroll Tax," NBER Working Papers 1736, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  32. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June. [Downloadable!] (restricted)
  33. Dardanoni, Valentino, 1991. "Precautionary Savings under Income Uncertainty: A Cross-Sectional Analysis," Applied Economics, Taylor and Francis Journals, vol. 23(1), pages 153-60, Part B, J.
  34. Fishback, Price V & Kantor, Shawn Everett, 1995. "Did Workers Pay for the Passage of Workers' Compensation Laws?," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 713-42, August. [Downloadable!] (restricted)
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  35. Sheshinski, Eytan & Weiss, Yoram, 1981. "Uncertainty and Optimal Social Security Systems," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 189-206, May. [Downloadable!] (restricted)
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  36. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December. [Downloadable!] (restricted)
  37. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114. [Downloadable!] (restricted)
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