Association for Public Policy Analysis & Management

The Medicaid program allows qualifying (low-income) adults and their children to receive free health insurance coverage. 72 million people were covered by Medicaid in 2014 generating roughly 475 billion in expenditures. In this study we investigate the causal effects of Medicaid participation on tobacco use and alcohol consumption. Medicaid increases the likelihood that families interact with healthcare professionals who would recommend decreasing or fully abstaining from tobacco use and alcohol consumption. On the other hand, transfer programs such as Medicaid allow families to reallocate income to other consumption goods that was previously allocated for healthcare expenses.  Therefore, we empirically examine how participation in Medicaid affects the consumption of alcohol and cigarettes. We address selection into Medicaid by exploiting state-level changes in eligibility requirements over time. For example, New Jersey and Tennessee increased the income eligibility limits for Medicaid coverage in 2009. We use longitudinal data from the Fragile Families and Child Well-being Study which follows unmarried parents and their children who are at risk of living in poverty. Fragile Families data include self-reported use of alcohol and tobacco as well as reports of Medicaid participation. The nature of the data allows us to compare changes in consumption behavior for poor families that are covered by Medicaid to those that are not covered by Medicaid across 5 different waves between 1998 and 2011 while controlling for a rich set of demographic characteristics.