The Effect of Affordable Care Act Medicaid Expansion on Post-Displacement Labor Supply among the Near-Elderly

Abstract

Expanded health insurance coverage under the Affordable Care Act (ACA) provides alternative channels to obtain health insurance coverage outside employment, which in theory may affect whether people want to work, how much they work, and the sorting of individuals into jobs. Although health insurance exchanges are available in all states, ACA Medicaid expansion is only available in states that chose to expand Medicaid coverage. The state-level variation in timing of Medicaid expansion provides a quasi-experiment setting that can be used to examine how health insurance coverage affected labor supply. In this paper, I study how Medicaid expansion affects the labor supply and re-employment outcomes of displaced (involuntarily unemployed) workers who are near-elderly, low-income, non-married, childless, and non-disabled. Data from 2011-2016 waves of monthly Current Population Survey (CPS) as well as 2010-2016 waves of Displaced Workers Survey (DWS) are used. Results from a discrete-choice model using the CPS suggest that, some displaced workers in expansion states became less likely to exit unemployment to employment while some other became more likely to exit unemployment to not-in-labor-force immediately following Medicaid expansion. While robustness tests suggest this may partly be attributed to state-level idiosyncrasies, my results reject large and persistent effect of Medicaid expansion on unemployment exits. The DWS does not have enough statistical power to identify the difference in reemployment outcomes between displaced workers in expansion and non-expansion states.