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This brief, part of the Urban Institute's "Recession and Recover" series, examines how the Medicaid and SCHIP programs respond during a recession and how that response may differ in the current recession from their responses in the past. It also assesses the extent to which health insurance coverage may decline as unemployment rises.
Economic downturns create serious problems with
health coverage. When unemployment rises, fewer
workers and dependents receive employer-sponsored
insurance (ESI). Some who lose ESI qualify for Medicaid
or the State Children’s Health Insurance Program
(SCHIP), while others become uninsured.
That said, the relationship between economic conditions
and health coverage is complex. Although Medicaid
enrollment among the elderly and people with
disabilities is modestly affected by changes in the business
cycle, the number of eligible low-income families
with children changes dramatically when economic conditions
worsen. Other factors outside the business cycle
that affect Medicaid and SCHIP costs include the ongoing
decline in the number of workers receiving ESI and
changes to federal and state policy. Important changes in
the latter category include the “de-linking” of Medicaid
from cash assistance in the wake of 1996 welfare reform
legislation, which reduced the number of eligible families
receiving health coverage, and enactment of SCHIP
Broader coverage trends over time bear out this complexity.
Until the start of this decade,
the percentage of Americans with ESI
and Medicaid varied with employment.
When more people were out of work,
fewer had ESI and more had Medicaid.
When unemployment rates fell, more
people had ESI and fewer relied on
Medicaid. However, from 2001 to 2007,
other factors swamped the effects of the
business cycle; in good times and bad,
ESI declined and Medicaid caseloads
To isolate the effect of macroeconomic
conditions on health coverage,
Urban Institute researchers examined
14 years of state-level data, controlling
for multiple confounding factors,
including changing eligibility rules for
health coverage in each state (Dorn et
al. 2008). They found that each 1 percentage
point rise in the national unemployment
rate can be expected to
increase Medicaid and SCHIP enrollment
by 1 million people (600,000 children
and 400,000 nonelderly adults).
That would increase Medicaid and
SCHIP costs by $3.4 billion, including
$1.4 billion in state spending. This represents a 1 percent
increase in total Medicaid and SCHIP expenditures.
Along with increasing Medicaid and SCHIP
enrollment, a 1 percentage point increase in unemployment
would also cause the number of uninsured adults
to grow by 1.1 million.
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