Association for Public Policy Analysis & Management

Reducing poverty is a stated policy motivation for recent public health insurance expansions. However, the impacts of insurance expansions on poverty can be challenging to measure because of the endogeneity between income and insurance eligibility. Income and assets are often determinants of eligibility for public health insurance, and so people may have incentives to distort or misreport income in order to maintain insurance eligibility. To circumvent this issue, I use consumers’ purchasing power to instrument for income; I measure how people’s purchases change in response to public health insurance eligibility.

My identification strategy exploits recent health insurance expansions resulting from the Affordable Care Act (ACA) Medicaid expansion in 2014, the ACA dependent coverage provision in 2010, and the introduction of Medicare Part D in 2006. Thus I am able to study the impacts of insurance coverage on three distinct populations: low-income working-aged adults, young adults aged 18 to 26, and elderly adults over the age of 65.

I use the Nielsen Household Consumer Panel (2004-14), which contains self-reported purchases data from 60,000 households. Variables include household demographics, geographic identifiers (to the zip code level), and product characteristics (to the UPC code level). I apply a quasi-natural experiment design, exploiting variation in the implementation of Medicare Part D, the ACA dependent coverage provision, and the ACA Medicaid expansion across populations, across states, and over time. I use a household-fixed effects regression model to estimate the effect of insurance expansion on households’ monthly purchases of a comprehensive set of products. I measure both income effects of health insurance, by studying the expansions’ impacts on total consumer purchases, and substitution effects, by studying impacts on purchases of specific products.

I find that the ACA and Medicare Part D led to increased total consumer spending, particularly in the categories of food, contraceptives, and over-the-counter medications. I provide evidence that increases in consumer purchasing power may be an important spillover effect of public health insurance expansions. These findings are particularly in the current uncertain health policy environment; it is important to understand such spillover effects in order to assess the total effects of any future changes to public insurance programs.

This paper contributes to the conference theme “Measurement Matters: Better Data for Better Decisions” by utilizing the Nielsen Household Consumer Panel, a dataset that has powerful applications in public policy but is not yet commonly used in the field. I propose consumers’ purchasing power an alternate way to measure financial wellbeing and argue that consumer purchases can serve as a proxy measure for income.