Association for Public Policy Analysis & Management

Research Objective: To examine the role state political and economic factors (political ideology, party control of government, fiscal capacity) play in explaining state income eligibility expansions for children and parents in Medicaid and the State Children’s Health Insurance Program (CHIP). 

Study Design: This analysis uses the significant variation in changes in state income eligibility levels for children and parents in Medicaid/CHIP from 1997-2010 to estimate the effect of political ideology (the percent of state residents who identify as politically liberal out of all residents who identify a political ideology) and other factors on expansion decisions, and how expansion decisions differ for child and parent expansions. A unique dataset of income eligibility levels, reported as percent of the Federal Poverty Level (FPL), by age-state-year for children and employment-state-year for parents from 1997-2010 was assembled and merged with state-level sociodemographic, political, and economic measures. OLS regression models with 868 state-year observations were used to test the effect of changes in political ideology, party control of government, and fiscal capacity on eligibility levels measured as %FPL. Models include two-way fixed effects (state and year) to account for unobserved, time invariant state characteristics that may be correlated with the dependent variable; standard errors are clustered by state to adjust for serial correlation due to repeated observations over time.

Principal Findings: Eligibility expansions for children in Medicaid/CHIP are driven by liberal ideology, increased fiscal capacity, Democratic control of government, and increased child population. A 1 percentage point (pp) increase in liberal ideology leads to a 1.9-2.0 pp increase in %FPL eligibility; a $1000 increase in total taxable resources per capita leads to a 2.0-2.3 pp increase in %FPL eligibility; a transition from Republican state government control to divided control or from divided control to Democratic control leads to a 9.3-10.2 pp increase in %FPL eligibility; and a 1 pp increase in children as a percent of state population leads to a 3.6-4.6 pp increase in %FPL eligibility. By contrast, parent eligibility expansions are not influenced by changes in state fiscal capacity or child population, but instead by ideology and politics.  A 1 pp increase in liberal ideology leads to a 3.3-3.5 pp increase in %FPL eligibility; a change in party control leads to a 28.8-33.2 pp increase in %FPL eligibility.

Policy Implications: State ideology is an important determinant of eligibility expansions, even after controlling for party control of state government and state capacity to finance expansions. While parental expansions are driven almost exclusively by ideology and party control, expansions for children are highly responsive to increases in state fiscal capacity: in the absence of political support, states are more willing to expand eligibility for children than for parents. Although CHIP is financed at least 65% by federal taxes, variation in states’ capacity to finance programs matters for children’s eligibility expansion decisions. As federal policies seek to encourage expansion of Medicaid/CHIP eligibility levels, policymakers must recognize the importance of state ideological support, particularly for eligibility expansions for adults, the group targeted by the Affordable Care Act.