Medicaid Expansion Reduced Obstetrical Care for the Newly Eligible

For pregnant women other than high-school dropouts or teens, a 10 percentage point increase in Medicaid eligibility was associated with a 0.62 percentage point decline in Cesarean section and a 0.28 percentage point decline in the use of a fetal monitor.

Changes in federal regulations in the late 1980s made many pregnant women eligible for Medicaid who would not have been eligible under the previous rules. By 1992, all state governments were required to cover the expenses of pregnancy and child birth for women in households with income up to 133 percent of the poverty line. States were permitted to extend eligibility, partly paid for with matching federal funds, for those with income up to 185 percent of the poverty line. As a result, the fraction of women eligible for Medicaid coverage should they become pregnant rose from 20 percent in 1986 to almost 45 percent in 1992.

How did this increase in eligibility affect the frequency of various procedures used in child birth? In The Technology of Birth: Health Insurance, Medical Interventions, and Infant Health (NBER Working Paper No. 5985), NBER Research Associates Janet Currie and Jonathan Gruber find that among teenagers and high-school dropouts, a 10 percentage point increase in Medicaid eligibility led to 0.45 percentage point increase in Cesarean sections, for example, and a 1.56 percentage point increase in the use of a fetal monitor. These results imply that the increase in eligibility caused many teen mothers and high school dropouts who previously had no insurance to receive procedures that were paid for by the Medicaid program. The authors find that on average the increase in procedure use had no effect on the health of the baby, as measured by the probability of neonatal mortality.

However, the increase in Medicaid eligibility for high-school dropout and teen mothers reduced neonatal mortality substantially if the nearest hospital had a Neonatal Intensive Care Unit (NICU), suggesting that Medicaid eligibility increased access to these or related services. Specifically, raising eligibility by 10 percent among teen/dropout mothers whose nearest hospital had a NICU reduced neonatal mortality by 4.5 percent.

Currie and Gruber also point out that women other than high-school dropouts and teen mothers had a strong incentive to drop their private insurance and go on Medicaid when eligibility was expanded because private insurance has copayments and deductibles while Medicaid cost them nothing. However, private insurance usually pays higher fees for medical procedures than Medicaid does. Therefore, Currie and Gruber reason that the expansion of Medicaid eligibility to women of higher income levels would actually reduce the fees that doctors and hospitals could charge, resulting in fewer medical procedures used on these women. Indeed, that is what happened. For pregnant women other than high-school dropouts or teens, a 10 percentage point increase in Medicaid eligibility was associated with a 0.62 percentage point decline in Cesarean section and a 0.28 percentage point decline in the use of a fetal monitor. Currie and Gruber find that neonatal mortality did not rise for babies born to these women, which implies that the marginal procedures that were dropped as a result of lower-paying insurance were of little benefit on average.