Intergenerational health effects of Medicaid

This paper investigates the effects of the introduction of Medicaid during the 1960s on next generations’ birth outcomes. A federal mandate that all states must widen the coverage to all cash welfare recipients generated cross-state variations in Medicaid eligibility, specifically among nonwhites who largely overrepresented the target population. I implement a reduced-form difference-in-differences strategy that compares the birth outcomes of mothers born in states with higher cash welfare recipiency versus low welfare recipiency and different years relative to the Medicaid implementation year. Using Natality data (1970–2004), I find that Medicaid significantly improves birth outcomes. The effects are considerably larger among nonwhites, specifically blacks. The effects do not appear to be driven by preexisting trends in birth outcomes, preexisting trends in households’ socioeconomic characteristics, changes in other welfare expenditures, and selective fertility. A back-of-an-envelope calculation points to a minimum of 3.9% social externality of Medicaid through income rises due to next generations’ improvements in birth outcomes.