Measuring the economic good of Medicaid and CHIP over the long term

April 16, 2015  |  General

The CHIP program (Children’s Health Insurance Program) has just been reauthorized by Congress. This is a program that provides health insurance for children of lower income families who still make too much income to qualify for Medicaid. Both CHIP and Medicaid provide essential, even life-saving healthcare for kids. That’s a good thing. A recent research study asked a deeper question: What are the long-term economic effects of providing this care, of keeping children healthy into adulthood? Their study doesn’t address the humanitarian aspects, which are huge, but rather the cold, hard economic ones.

The authors used the expansion of Medicaid and the implementation of CHIP that occurred in the 1990s to follow children who had obtained healthcare via those programs and were now adults. The bottom line is that well over half of those healthcare dollars spent were recouped in the form of taxes over the working lifetime of the subjects. Again, this doesn’t even take into account the global benefit to society of keeping people from suffering. In the words of the authors:

The government will recoup 56 cents of each dollar spent on childhood Medicaid by the time these children reach age 60. This return on investment does not take into account other benefits that accrue directly to the children, including estimated decreases in mortality and increases in college attendance.

There were several, less measurable multiplier effects that pushed the return even higher than that. One of these was the probability of the subjects collecting Earned Income Tax Credits in the future. They conclude:

We find that by expanding Medicaid to children, the government recoups much of its investment over time in the form of higher future tax payments. Moreover, children exposed to Medicaid collect less money from the government in the form of the Earned Income Tax Credit, and the women have higher cumulative earnings by age 28. Aside from the positive return on the government investment, the eligible children themselves also experience decreases in mortality and increases in college attendance.

To me it seems pretty intuitive that keeping children healthy makes them more likely to be healthy adults, and healthy adults are more likely to become able-bodied, working taxpayers. They also have longer lifespans. This study gives important, long-term data to support that intuition. Plus, it’s the right thing to do.


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