Association for Public Policy Analysis & Management

This paper estimates the net change in distortionary labor supply incentives under the ACA's Medicaid expansions.  The key question is whether the pre-existing incentives to distort earnings under Medicaid (in order to stay under an earnings limit) become stronger or weaker when earnings limits rise substantially.  The answer depends crucially upon how many people are in the relevant (potential) income range near eligibility in each scenario.  We use a theoretical model applied to the Survey of Income and Program Participation to develop expected effects for states that have expanded Medicaid, as well as hypothetical effects for non-expanding states if expansion were mandatory.