Health Care Utililization, Costs, and Financing

Growth in local jobs that offer health insurance can move the working poor off the Medicaid program

California's Medicaid program, Medi-Cal, is the largest State insurance program in the United States. When more local jobs are available that offer private health insurance, more people move off the Medi-Cal rolls, according to a new study supported in part by the Agency for Healthcare Research and Quality (HS09884). Conversely, continued decreases in employer-based health insurance coverage will greatly increase the demand for public insurance coverage. This will place financial pressures on State governments, cautions study author, Krista M. Perreira, Ph.D., of the University of North Carolina, Chapel Hill.

Dr. Perreira created an index of the availability of employer-sponsored health insurance to the working poor (employed persons living below 200 percent of the Federal Poverty Level, FPL) using Statewide health insurance and other data from 1987 and 1995. Dr. Perreira estimated results using a discrete duration model, where the monthly Medicaid exit probability was a function of demographic characteristics, local labor market variables, the probability of having employer-sponsored insurance, and fixed year and county effects.

Based on the model, she calculated that a 2.5 percent increase in the availability of employer-sponsored insurance would lead to a 6 percent increase in the likelihood a worker would exit Medicaid within 2 years. It would take a 2 percent decrease in unemployment rates or a 10 percent increase in average quarterly earnings to yield an equivalent increase in the likelihood of exiting Medicaid within 2 years. During the study period, the average California unemployment rate was 8.6 percent, average quarterly earnings were $5,343 (1987 dollars), and 51 percent of civilian workers were insured through their own employer. The average insurance rate was lower (44 percent) for those living below 200 percent of the FPL.

See "Crowd-in: The effect of private health insurance markets on the demand for Medicaid," by Dr. Perreira, in the October 2006 HSR: Health Services Research 41(5), pp. 1762-1781.

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