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The Effects of SCHIP Expansion on Family Insurance and Out-of-Pocket Medical Costs

April 2009

H. Luke Shaefer, University of Michigan; Colleen M. Grogan, University of Chicago; Harold A. Pollack, University of Chicago

Download 'working_paper09-07.pdf'.


Objective: To assess the effects of Medicaid and SCHIP-related crowd-out on out-of-pocket medical expenditures and family premium costs for affected families.

Data Sources: Data are drawn from the 2001 and 2004 panels of the Survey of Income and Program Participation (SIPP), administered by the U.S. Census Bureau. We construct a nationally representative, longitudinal sample of children, ages 0-18, and their families for the period 2001-2005.

Study Design: We hypothesize that child health status is a determinate of crowd-out, and that crowd-out should reduce out-of-pocket and family premium costs. We first estimate the extent of crowd out for 2001-2005. Next we operationalize a definition of crowd-out that exploits the SIPP’s longitudinal design. We use this in a bootstrapped instrumental variable approach to estimate the effects of crowd-out on out-of-pocket and premium costs.

Principal Findings: Estimates suggest there was substantial crowd-out during 2001-2005. Families who crowd out appear relatively vulnerable, and child health status appears highly predictive of crowd-out. Crowd-out appears to provide a cash-equivalent transfer of approximately $2,500 annually for families in the form of reduced out-of-pocket and premium costs.

Conclusions: Contrary to current public policy debates that often assume crowd-out represents a societal cost, our results suggest that it may bring important social benefits to vulnerable families.

This research was supported with funds provided by the U.S. Census Bureau, Housing and Household Economics Statistics Division.

Child Well-being and Child Development, Health, Health Insurance, and Health Care, Social Welfare Programs and Policies