Association for Public Policy Analysis & Management

Policy-makers have argued that providing public health insurance coverage to the uninsured lowers long-run costs by reducing the need for expensive hospitalizations and emergency department visits later in life. In this paper, we provide evidence for such a phenomenon by exploiting a legislated discontinuity in the cumulative number of years a child is eligible for Medicaid based on date of birth. We find that having more years of Medicaid eligibility in childhood is associated with fewer hospitalizations and emergency department visits in adulthood for blacks. Our effects are particularly pronounced for hospitalizations and emergency department visits related to chronic illnesses and those of patients living in low-income neighborhoods. Furthermore, we find suggestive evidence that these effects are larger in states where the difference in the number of Medicaid-eligible years across the cutoff birth date is greater. We do not find effects on hospitalizations related to appendicitis or injury, two conditions that are unlikely to be affected by medical intervention in childhood. Our calculations suggest that lower rates of hospitalizations and emergency department visits during one year in adulthood offset between 3 and 5 percent of the initial costs of expanding Medicaid. This implies substantial savings if the decline in utilization spans multiple years or grows with age.