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Medicaid at 50: Cuts Poverty, Boosts Financial Health

Medicaid provides significant financial support to low-income beneficiaries in addition to improving their health, new research shows.  Medicaid lifted 2.6 million people out of poverty in 2010, equating to a 0.7 percentage-point drop in the poverty rate.  Medicaid cut poverty most among adults with disabilities, children, seniors, African Americans, and Hispanics.        

That’s because Medicaid dropped average out-of-pocket medical costs by nearly $500 per beneficiary, health economists Benjamin Sommers and Donald Oellerich find.  Medicaid beneficiaries would have spent, on average, more than twice as much out-of-pocket on health care were they not enrolled in Medicaid, the authors report.  And this estimate likely underestimates Medicaid’s positive impact, Sommers and Oellerich say, because their analysis cannot fully control for all the variables that lead to greater medical needs, and hence spending, among the Medicaid population.    

After reviewing other research on anti-poverty programs’ effectiveness, Sommers and Oellerich conclude that Medicaid is the third-most-effective means-tested program at reducing poverty, behind the Earned Income Tax Credit and SNAP (the Supplemental Nutrition Assistance Program, formerly food stamps).  This buttresses recent findings from the Oregon Health Experiment that adults enrolled in Medicaid pay less in out-of-pocket medical costs and have less medical debt.     

Notably, Medicaid is designed to provide this substantial financial protection.  Medicaid beneficiaries are low-income and more likely to have significant medical needs.  Thus, states typically don’t charge beneficiaries premiums and charge only nominal cost sharing for services.  Medicaid also covers many services that private insurance typically doesn’t, such as long-term services and supports, home health care, and mental health care.

Medicaid’s poverty-reducing impact will likely be even stronger moving forward, given health reform’s targeted Medicaid expansion to low-income adults, Sommers and Oellerich explain.  States would should consider this when deciding whether to expand Medicaid.

As Medicaid turns 50, learn more about how it improves access to health care, its long-term benefits, and why states should expand Medicaid: