Medicaid Is the World's Smallest Hammock

Medicaid was supposed to lull people into lives of dependency. That's not quite what the early results of expansion show.
Life on Medicaid, or so the theory goes. Photographer: Norberto Duarte/AFP/Getty Images

Free health care for the poor was supposed to lull the able-bodied into lives of dependency. Maybe it just takes awhile.

As of Jan. 1, half the states used funds that are newly available under Obamacare to offer Medicaid to those earning up to 138 percent of the federal poverty line. The other half didn't. As I wrote in December, that's a human tragedy, but it's also a natural experiment: Will more people in the expansion states drop out of the labor force as a result?

We now have the first batch of data to address that question, and the answer is, not really. Across the 24 states (plus the District of Columbia) that expanded their Medicaid programs in January, the labor-force participation rate moved up, from 63.44 percent in December to 63.49 percent in January, according to figures released this month by the Bureau of Labor Statistics.

More people in the labor force is the opposite of what the hammock theory predicts. But that's not the whole story. The labor participation rate also moved up in the 26 states that didn't change their programs, from 63.75 percent to 63.82 percent. That's an increase of 0.07 percentage points, compared with 0.05 percentage points for the expansion states.

Is that a victory for the hammock crowd? More like a draw. A difference of two-hundredths of 1 percent is close to meaningless -- a much smaller effect than even the Congressional Budget Office's projection that total hours worked would fall by 1.5 percent to 2 percent because of Obamacare as a whole.

Of course, two big caveats apply here. First, we have data for only one month; February's numbers could show something completely different. Second, these figures don't prove causation, so we don't know for sure what drove the work decisions of millions of Americans.

But let's consider what the data doesn't show: It doesn't show that expanding Medicaid significantly contracts the labor force, at least not right away.

And imagine, hypothetically, that differential held over time -- that making health insurance available to the near-poor was associated with a 0.02 percent lower labor-force participation rate. Is that enough of a reduction in total economic output to justify withholding health care from people who can't otherwise afford it?

That's not a rhetorical question. Half a dozen states are debating whether to sign up for expanding Medicaid, and the program's early years strongly suggest that more states will follow. Numbers like these suggest that what's holding up the program is something other than worries about people winding up in hammocks.

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