Work Incentives of Medicaid Beneficiaries and The Role of Asset Testing

Svetlana Pashchenko and Ponpoje Porapakkarm

MPRA Paper from University Library of Munich, Germany

Abstract: Should asset testing be used in means-tested programs? These programs target low-income people, but low income can result not only from low productivity but also from low labor supply. We aim to show that in the asymmetric information environment, there is a positive role for asset testing. We focus on Medicaid, one of the largest means-tested programs in the US, and we ask two questions: 1) Does Medicaid distort work incentives? 2) Can asset testing improve the insurance-incentives trade-off of Medicaid? Our tool is a general equilibrium model with heterogeneous agents that matches many important features of the data. We find that 23% of Medicaid enrollees do not work in order to be eligible. These distortions are costly: if individuals' productivity was observable and could be used to determine Medicaid eligibility, this results in substantial ex-ante welfare gains. When productivity is unobservable, asset testing is effective in eliminating labor supply distortions, but to minimize saving distortions, asset limits should be different for workers and non-workers. This work-dependent asset testing can produce welfare gains close to the case of observable productivity.

Keywords: health insurance; Medicaid; labor supply; asset testing; general equilibrium; life-cycle models (search for similar items in EconPapers)
JEL-codes: D52 D91 E21 H53 I13 I18 (search for similar items in EconPapers)
Date: 2016-07-07
New Economics Papers: this item is included in nep-dge, nep-ger, nep-hea, nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/72413/1/MPRA_paper_72413.pdf original version (application/pdf)

Related works:
Journal Article: WORK INCENTIVES OF MEDICAID BENEFICIARIES AND THE ROLE OF ASSET TESTING (2017)
Working Paper: Work Incentives of Medicaid Beneficiaries and the Role of Asset Testing (2016)
Working Paper: Work Incentives of Medicaid Beneficiaries and The Role of Asset Testing (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72413

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().