Medicaid Work Requirements, Labor Market Effects and Welfare

We use an overlapping generations model with labor supply decisions, health risk, and health insurance choices to investigate the impact of proposed work requirements for Medicaid eligibility. Calibrating the model to US data, we simulate counterfactual experiments with a minimum weekly work hours requirement. Our partial and general equilibrium results indicate that Medicaid work requirements increase labor force participation, reduce hours worked, and boost output. However, most scenarios show overall welfare losses, mitigated somewhat by general equilibrium effects. Welfare losses are higher among low-income households, smaller for middle-income households, and result in gains for high-income households. The smallest welfare loss occurs when the reform targets healthy individuals, allowing sicker individuals to remain on Medicaid regardless of their work status.