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Medicaid-Eligible Children Grow Up to Earn More and Pay More in Taxes

January 21, 2015 at 12:01 PM

People eligible for Medicaid in childhood earn more as adults, and thus contribute more in federal taxes, than other low-income people who weren’t eligible, a recent promising study published by the National Bureau of Economic Research (NBER) finds.  And those benefits, which help offset the cost of providing Medicaid coverage, grow with each year of eligibility.

These findings are the most recent evidence of Medicaid’s wide-ranging benefits to the nation as well as enrollees.  Nearly 30 million Medicaid enrollees — half of all people with Medicaid coverage — are age 18 or under.

Analysts from the Treasury Department and Yale University examined IRS data for people born just before Congress expanded Medicaid coverage for children in the mid- to late 1980s.  These people contributed $186 more in total taxes through age 28 for each additional year they were likely Medicaid-eligible as children.

Other findings from the study suggest potential explanations:  People with more years of likely Medicaid eligibility received less from the Earned Income Tax Credit, had lower mortality rates, were more likely to attend college, and (among women) had higher wages, for example.

Because of their increased tax contributions, “we conclude that the government recoups 14 cents for each dollar that it spent on Medicaid for children by the time they reach age 28,” the authors conclude.  By age 60, they add, the government recoups 56 cents on the dollar.

Although more research is needed to confirm these findings, the NBER-published study — the first to examine the long-term economic impacts of additional years of Medicaid eligibility — contributes to a larger body of research on Medicaid’s positive impacts both in and beyond health care.

Recent research in Oregon, for example, shows that enrolling in Medicaid improves access to health care and reduces medically related financial hardships.  Studies have also shown the long-term health benefits of expanding Medicaid, such as a national study finding that people more likely to be eligible for prenatal and infant care through Medicaid were healthier in young adulthood.