A welfare analysis of Medicaid and recidivism

Erkmen G. Aslim, Murat C. Mungan and Han Yu

Health Economics, 2024, vol. 33, issue 11, 2463-2507

Abstract: We present conservative estimates for the marginal value of public funds (MVPF) associated with providing Medicaid to inmates exiting prison. The MVPF measures the ratio between a policy's social benefits and its governmental costs. Our MVPF estimates suggest that every additional $1 the government spends on providing inmates exiting prison with Medicaid coverage can result in social benefits ranging between $3.45 and $10.62. A large proportion of the benefits we consider stems from the reduced future criminal involvement among former inmates who receive Medicaid. Employing a difference‐in‐differences approach, we find that Medicaid expansions reduce the average number of times a released inmate is reimprisoned within 1 year by approximately 11.5%. By combining this estimate with key values reported elsewhere (e.g., victimization costs, data on victimization and incarceration), we quantify specific benefits arising from the policy. These encompass diminished criminal harm due to lower reoffense rates, direct benefits to former inmates through Medicaid coverage, increased employment opportunities, and reduced loss of liberty resulting from fewer future reimprisonments. Net‐costs consist of the cost of providing Medicaid net of changes in the governmental cost of imprisonment, changes in the tax revenue due to increased employment, and changes in spending on other public assistance programs. We interpret our estimates as conservative since we deliberately err on the side of under‐estimating benefits and over‐estimating costs when data on specific items are imprecise or incomplete. Our findings align closely with others in the sparse literature investigating the crime‐related welfare impacts of Medicaid access, underscoring the substantial indirect benefits public health insurance programs can offer through crime reduction, in addition to their direct health‐related advantages.

Date: 2024
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