Does Medicaid Expansion Lead to Income Adjustment? Evidence from the Survey of Income Program Participation

TL;DR

This study uses regression discontinuity analysis on survey data to show that Medicaid expansion incentivized childless adults to lower their earnings to qualify, with effects varying by policy changes.

Contribution

It provides new evidence of significant labor supply responses to Medicaid eligibility thresholds using detailed survey data and a regression discontinuity approach.

Findings

Childless adults lowered earnings by about 39 FPL percentage points.

Labor supply responses occurred along both extensive and intensive margins.

Earnings adjustments were largest when the individual mandate penalty was in effect.

Abstract

Using monthly Survey of Income Program Participation (SIPP) data and a regression discontinuity (RD) design at the 138 percent Federal Poverty Line (FPL) threshold, this paper shows that childless adults in Medicaid expansion states lowered their lowest monthly earnings by about 39 FPL percentage points, equal to 700 dollars in 2025 for a two person household, to qualify for Medicaid. The response was largest when the individual mandate penalty was in effect and declined after the penalty was reduced to zero in 2019. Evidence from zero earnings months and hours worked indicates adjustments along both extensive and intensive margins. These results validate lowest monthly earnings as a practical eligibility measure and provide new evidence of substantial labor supply responses to the Affordable Care Act Medicaid notch.