This project is an examination of the impact of public health insurance for poor children and pregnant women on household economic decisions. Three important decisions are focused on: (i) the decision of whether or not to have a child; (ii) the choice of medical insurance coverage (public, private, or none); and (iii) the employment decision. The analysis is based on an examination of the impact of federal legislation of the late 1980s which dramatically expanded the Medicaid program to poor children and pregnant women who were previously ineligible. Panel data on fertility, insurance, and employment from the Survey of Income and Program Participation (SIPP), together with dynamic estimation methods (duration models), are used to shed new light on the impacts of public health insurance. A key difference between this research and previous studies is the use of panel data. In panel data, households may be observed both before and after they become eligible through the expansions, and thus behavioral responses are directly observable. In addition, the monthly data available in the SIPP provide a better match between changes in entitlement and changes in employment, insurance status, and fertility, and allow other time varying factors such as unemployment rates to be controlled for. The research will contribute to the literatures on the impact of public policies on fertility, health insurance coverage, labor supply, and job mobility. It will also demonstrate the application of duration models with endogenous explanatory variables to policy analysis. Because these models are computationally difficult, they have not been widely used by applied researchers. In particular, they have not been used to examine the impact of public health insurance, despite the important dynamic aspects of the policy. Recent federal legislation authorizing the largest increase in public spending on insurance for children in three decades makes this research particularly timely and of interest to policymakers as they begin the process of designing and implementing these new expansions. The first part of this research examines the impact of the Medicaid expansions on fertility, a question that has not been previously addressed. The Medicaid program was expanded to cover the costs of prenatal care, delivery, and infant and child health care for eligible families, thus reducing some of the costs associated with fertility. The impact of public health insurance on fertility is an important question in light of public concerns about birth and abortion rates. A duration model is used to estimate the probability of birth in a given month, accounting for the possible endogeneity of eligibility for, and participation in, Medicaid. In the second part of the research, the impact of expanded Medicaid eligibility on the rate and type of transitions between health insurance states (public, private, and none) is examined. As the intent of the policy was to provide insurance to uninsured children, if the program worked as intended the rate of transitions between the uninsured and publicly insured states should increase. However expanding public health insurance may also have the unintended consequence of increasing transitions out of private insurance and into public insurance, increasing the costs of the program and potentially leading to distortions of insurance markets. The determinants and correlates of movements between insurance states is estimated, again using dynamic models. Finally, the effect of public health insurance on labor market transitions, including transitions into and out of the labor force and between jobs, is examined. This portion of the proposed project represents a contribution both to the literature on the labor supply effects of public programs and to the literature on health insurance and job mobility. As a major goal of current policy is to move individuals out of welfare and into the labor force, it is important to determine the potential contribution of public insurance in easing welfare-to-work transitions.
