Public Health Insurance, Labor Supply, And Employment Lock

Transcription

1 Public Health Insurance, Labor Supply, And Employment Lock Craig Garthwaite Kellogg School of Management Northwestern University and NBER Tal Gross Mailman School of Public Health Columbia University and NBER Matthew J. Notowidigdo The Booth School of Business University of Chicago and NBER

2 Health insurance in the United States United States is unique among industrialized countries in connecting employment tightly to health insurance Primarily a historical accident resulting from wage controls surrounding World War Two Persistence relates to employer provided insurance providing both a convenient method risk pooling and fringe benenits being a form of untaxed compensation In 2011, approximately 90 percent of privately insured Americans had coverage through an employer

3 Lack of private non- employer health insurance options for the non- elderly In most states, public insurance limited to specinic categorical groups Individual market suffers from fears of adverse selection Hendren (2013) describes high denial rates for applicants in the non- group market

4 We examine the labor supply effects of changes to a large non- employer health insurance option in Tennessee In 1994, Tennessee created a unique expansion of their public health insurance program Moved all categorically eligible enrollees into managed care Used purported savings to fund a massive expansion for uninsured and uninsurable Enrolled individuals regardless of income level or categorical eligibility for traditional Medicaid

5 TennCare was bold, it was comprehensive, it looked at the whole low- income population and was seen by many as a model for how we might provide coverage to the low- income population, especially by bringing in childless adults who historically have never been eligible for Medicaid. - Dianne Rowland Execu1ve Director of Kaiser Commission on Medicaid and the Uninsured

6 Characteristics of those who lost coverage Roughly 170,000 Tennessee residents were enrolled in the Uninsured and Uninsurable programs and lost coverage in Four percent of the non- elderly population All enrollees not categorically eligible for Medicaid lost coverage. Disenrollees were likely to be: Non- disabled Childless adults Higher income than traditional population

7 TennCare Population by Category Figure 1: Quarterly Medicaid Enrollment in Tennessee 1,400 TennCare Cuts 400 Total TennCare Enrollment in thousands 1,350 1,300 1,250 1,200 1,150 1,100 1,050 Total Medicaid Uninsured and Uninsurable Uninsured and Uninsurable Program Enrollment in thousands 1, jul jan jul jan jul2009 Note: This figure presents enrollment numbers reported in TennCare quarterly reports. Tennessee dis-enrolled most Total of Medicaid those in the Enrollment Uninsured and Uninsurable program in the last quarter of Uninsured and Uninsurable

8 Non- disabled childless adults under 65 cannot get TennCare, no matter how poor they are. Many parents whose children have turned 18 are also unable to get TennCare - Tennessee Jus1ce Center, 2010

9 The Affordable Care Act of 2010 Largest change to US health policy since the creation of Medicare and Medicaid in the 1960s Increase insured population by 25 million Approximately 13 million will receive Medicaid coverage This assumes full adoption of the optional Medicaid expansion At least 17 states are considering not adopting the Medicaid expansion

10 Similarities between TennCare and the ACA TennCare Expansion Affordable Care Act Expansion of public insurance to uninsured and uninsurable No premiums below 100% poverty line Subsidized premiums to 400% poverty line Expansion largest for categorically ineligible (i.e. able- bodied childless adults) Medicaid expansion to 138% poverty line Subsidized private coverage until 400% poverty line 80% of newly Medicaid eligible are childless adults

11 Example individual premiums for the two programs, 2004 TennCare 1 Estimated ACA 2 Under 100% No Premium No Premium 138% $24 No Premium 150% $42 $47 200% $120 $98 250% $180 $ % $240 $ % $350 $295 1 TennCare Sec1on 1115 Waiver 2 Based on federal poverty level in 2004

12 Reconsidering the role of Medicaid notches in current health policy Previous work has examined the impact of strict income limits (e.g. Yelowitz, 1995) Creates Medicaid related notches in enrollee budget sets that result in strong work disincentives Limits applicability of these previous estimates to recent policy changes such as the Affordable Care Act These policies contain no strict income limits at low income levels Affects different groups than traditional public health insurance enrollees

13 We exploit two sources of variation 1. Compare outcomes in Tennessee to rest of the south (difference- in- difference) Difference-in-difference specification: y st = α s + δ t + β I{s =Tennessee} I{t 2006} + ε st Difference-in-difference specification: Triple-differencey st specification: = α s + δ t + β I{s =Tennessee} I{t 2006} + ε st 2. Compare outcomes for childless adults in Tennessee to Triple-difference y ist other = γ adults i + α s specification: + in δ t Tennessee + γ i α s + γ i δ and t + α rest s δ t + of south (triple- difference) β I{i =childless} I{s =Tennessee} I{t 2006} + ε ist Within-Tennessee y ist = specification: γ i + α s + δ t + γ i α s + γ i δ t + α s δ t + β I{i =childless} I{s y rt = λ r + δ t + β TennCare Enrollment =Tennessee} I{t 2006} + ε ist r I{t 2006} + ε rt Within-Tennessee specification: 2004 Population r

14 Primary Data: March supplement to the Current Population Survey Sample: Ages Years Those with a College degree or less We compare Tennessee to rest of south Classify childless adults as those not reporting a child under the age of 18 in the home

15 Change in Public Coverage, Difference in Difference Figure 2. Share Publicly Insured.18 TennCare Disenrollment Share covered by public health insurance, other Southern states Tennessee Other Southern States Note: This figure presents the share of CPS respondents ages without an advanced degree who report being covered by public health insurance in Tennessee versus other Southern states. The figure presents means by Share covered by public health insurance, Tennessee

16 Change in Public Coverage, two-year cells. See text for details. Triple Difference.2 advanced degree who report being covered by public health insurance in Tennessee versus other Southern states. The figure presents means by Figure 3. Share Publicly Insured, Triple Difference TennCare Disenrollment Share covered by public health insurance Tennessee, No Children Other Southern States, No Children Tennessee, Has Children.12.1 Other Southern States, Has Children

17 Change in Share Employed, Difference in Difference.78 Figure 4. Share Employed TennCare Disenrollment.76 Share employed, other Sourthern states Tennessee Other Southern States Share employed, Tennessee Note: This figure presents the share of CPS respondents ages without an advanced degree who report being employed in Tennessee versus other Southern states. The figure presents means by two-year cells. See text for details..64

18 advanced degree who report being employed in Tennessee versus other Southern states. The figure presents means by two-year cells. See text for details. Change in Share Employed, Triple Difference Figure 5. Share Employed, Triple Difference.75 Other Southern States, Has Children TennCare Disenrollment Share employed.7 Other Southern States, No Children Tennessee, Has Children.65 Tennessee, No Children

19 Effect of the TennCare disenrollment on labor supply Has Public Health Insurance Employed Difference- in- Difference Tennesse X Post 2005 X (0.01) [0.000] Triple Difference (0.011) [0.038] Tennesse X Post 2005 X No Children (0.017) [0.001] (0.020) [0.032]

20 Tennessee s change in public health insurance rate is large relative to typical changes Figure 6. The Distribution of Changes in the Public Insurance Rate 15 Change for childless adults in Tennessee, to Number of state-year cells with given change in public insurance rate for childless adults Change in fraction public insured

21 Note: This figure presents a histogram of two-year changes in the private insurance rate among childless adults in each state in the south, Tennessee s change employment rate is large relative to typical changes Figure 7. The Distribution of Changes in the Employment Rate 15 Change for childless adults in Tennessee, to Number of state-year cells with given change in employment rate for childless adults Change in fraction employed

22 How quickly did the change occur? One concern is that individuals were able to Nind jobs, but this process took some time Local Area Unemployment Statistics (LAUS) is based on CPS data and state unemployment insurance records. We estimate monthly changes in employment surrounding the disenrollment

23 Share employed by month, LAUS Figure 10. Share Employed By Month, LAUS TennCare Disenrollment Share employed in rest of South Tennessee Share employed in Tennessee Other Southern States Note: This figure presents the estimated monthly employment rate using data from the Local Area Unemployment Statistics (LAUS) for Tennessee versus other Southern states. See text for details.

24 the process that ultimately led to the disenrollments. The disenrollments then began in July of Search volume for phrase job openings 2 Figure 7. Searches on Google for Phrase Job Openings TennCare Disenrollment Tennessee Search Volume Relative to January, Other Southern States

25 How big is the labor supply increase? Chetty et al. (2011) report a mean extensive- margin labor supply elasticity of Our triple- difference estimates imply an 6.5% increase in employment rate in response to disenrollment. A 26.2% wage increase would cause same increase in employment. That is an increase of $2,400 $4,900 (for 100% 200% of FPL). The average price of employer- provided health insurance in Tennessee was $3,700 (AHRQ, 2006)

26 Are the observed employment changes consistent with a search for health insurance? Evidence of a labor supply increase following the disenrollment If this change is caused by a search for health insurance, employment increases should be concentrated among individuals working more hours per week. These jobs are far more likely to offer health insurance

27 Effect of the TennCare disenrollment on labor supply Has Public Health Insurance Employed Employed Fewer than 20 Hours Difference- in- Difference Employed More than 20 Hours Employed with Private Insurance Tennessee * Post (0.01) [0.000] (0.011) [0.038] (0.004) [0.758) (0.010) [0.023] (0.013) [0.507] Triple Difference Tennessee * Post 2005 * No Children (0.017) [0.001] (0.020) [0.032] (0.009) [0.843] (0.020) [0.042] (0.023) [0.084]

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30 Are the observed employment changes consistent with a search for health insurance? Evidence of a labor supply increase following the disenrollment If this change is caused by a search for health insurance, employment increases should be concentrated among individuals working more hours per week. These jobs are far more likely to offer health insurance There should also be a change in the rate of private insurance coverage That change should be relatively swift given LAUS results

31 How quickly did the change in insurance status occur? CPS doesn t provide monthly estimates of insurance status. Behavioral Risk Factor Surveillance System (BRFSS) has within- year measures of insurance coverage. However, the BRFSS does not distinguish between the source of insurance coverage

32 Note: This figure presents the estimated monthly employment rate using data from the Local Area Unemployment Statistics (LAUS) for Tennessee versus other Southern states. See text for details. Share insured, BRFSS Figure 11. Share Insured By Month, BRFSS 0.90 TennCare Disenrollment 0.88 Tennessee Share covered by health insurance Other Southern States

33 Heterogeneity in Response to Disenrollment Labor supply (and crowdout) responses are likely a function of both valuation of health insurance and ability to obtain private coverage Groups that have high valuation of health insurance should display: Larger labor supply responses, and Greater increase in private, employer- provided health insurance. Accordingly, we Nind our largest labor supply responses for: Older workers Sicker workers

34 Extrapolation to ACA: Employment There exist 840, million childless adults, earning less than 200 percent of the FPL, with employer- provided insurance, and not currently eligible for public coverage. Applying our employment estimates suggest that 530, ,000 of these adults will leave the labor force, a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points.

35 What are these people going to do if they are not working? Unclear what exactly people do with their time the incentive of government programs push them out of the labor force We Nind our strongest evidence for older workers This could just be affected early retirement If could be that those affected could be those with strong disutility from work Could just be preferences for leisure We also Nind large responses among those in poor health Welch (1999) demonstrates that the incomes of those who do not work are not abysmally low Therefore the decision to not work does not mean destitution

36 Conclusions The TennCare disenrollment led to a sharp rise in employment and private coverage. Suggests substantial employment lock. Theoretical models of optimal public health insurance generosity should account for endogenous labor supply (Chetty and Saez, 2010).