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The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) introduced new rules limiting immigrants' eligibility for public assistance programs, including Medicaid. To offset adverse impacts of federal reforms, many states enacted state-funded assistance programs for immigrants. A study by George Borjas, funded by the Economic Research Initiative on the Uninsured (ERIU), exploits variation across states in the relative generosity of such programs to examine the effects of welfare reform on health insurance coverage and labor force participation among immigrants.

Higher Coverage Rates Among Immigrants in States with Less Generous Welfare Programs
Relative to natives, noncitizen immigrants living in states with less generous welfare programs following PRWORA were:

  • 4.3% less likely to be covered by Medicaid than those in more generous states.
  • 10.1% more likely to be covered by Employer-Sponsored Insurance than those in more generous states.
  • 2.4% more likely to be covered by any health insurance than those in more generous states.

Crowdout Effect between Medicaid and Employer-Sponsored Coverage
Although coefficients are only marginally significant, an increase in the probability of receiving Medicaid is matched by a decrease in the probability of being covered by employer-sponsored insurance (coefficient for non-citizens of -1.79 (SE 0.94), and for all immigrants of -1.35 (SE 1.33).

Higher Labor Force Participation Among Immigrants in States with Less Generous Welfare Programs
Relative to native men, noncitizen immigrant men living in states with less generous welfare programs following PRWORA were:

  • 6.0% more likely to work than those in more generous states.
  • 4.0% more likely to work full time than those in more generous states.

Labor force participation rates among noncitizen immigrant women increased by about 3 percentage points regardless of the type of state they lived in. The number of hours worked for noncitizen women was higher in states with less generous welfare programs.

These findings suggest that immigrants responded to state and federal policy changes in ways that influenced their health insurance status. Policy makers should therefore consider the way in which state responses might add to or counteract incentives associated with federal policies. This study also contributes to the debate about whether and how rising numbers of immigrants are related to rising uninsurance rates by showing that growth in the immigrant population during the 1990's did not contribute substantially to increases in the number of uninsured.

There are several caveats to this work. The first relates to the definition of the intervention. PRWORA provided a variety of incentives for immigrants to seek employment and the state reforms, which provided increased benefits to immigrants, reduce those incentives. Although the results are robust to several changes in the definition of the intervention, one cannot assess which of the state benefits accounts for the findings. In this context, substitution of ESI for Medicaid reflects a response to a different type of intervention than a pure Medicaid expansion. and so the two types of crowd out effects cannot be directly compared.

The second issue is whether we can assume that natives are good controls for non-citizen immigrants, and that states that adopted 'generous reforms' are otherwise equivalent to other states. If states adopting generous benefits are experiencing differences in labor market conditions and if those differences affect immigrants differentially than natives, the results may be compromised. The author takes several steps to address these concerns, and it is difficult to assess the magnitude of any remaining bias.

Finally, the study is not designed to assess which sub-groups of immigrants are benefiting from generous state programs and which subpopulations may be using those programs to avoid employment (and hence ESI). Some subpopulations of immigrants (single parents, first generation immigrants, less educated individuals) could have less opportunity to substitute ESI for public assistance.

Current Population Surveys (CPS), March 1995 - 2001 Annual Demographic Files. Immigrant status (foreign-born, native) and citizenship status are based on the classification of the household head. For labor supply analyses, the sample was restricted to persons aged 18 to 64.

A reduced-form "triple difference" regression model is used to estimate effects for immigrants relative to natives, in less generous relative to more generous states, post-PRWORA relative to pre-PRWORA. States are categorized as either "more generous" or "less generous" with respect to their state-funded public assistance programs for immigrants. States classified as "more generous" offered at least one of the following programs: Food Assistance or Supplemental Security Income (SSI) for pre-enactment immigrants or Temporary Assistance to Needy Families (TANF), Medicaid, food assistance, or SSI to post-enactment immigrants.

A structural two-stage regression model is used to estimate crowdout effects--how the probability of ESI coverage is affected by the probability of Medicaid coverage. The structural parameter for the probability of Medicaid coverage is estimated using instrumental variables--the instruments are changes in eligibility rules associated with immigrant provisions in the welfare reform legislation, and the response of individual states to the changes in federal policy.

The models include a vector of socioeconomic characteristics, a vector of state fixed effects, and various interaction terms. Alternative definitions for immigrant status (based on time in country), and different approaches for characterizing the generosity of state welfare programs were used to test the sensitivity of study findings.

Welfare Reform, Labor Supply, and Health Insurance in the Immigrant Population
George Borjas, Harvard University

Conference paper presented at ERIU Research Conference, July 2003

Borjas, George J. 2003. "Welfare reform, labor supply, and health insurance in the immigrant population." Journal of Health Economics 22 (6): 933-58.

ERIU Working Paper #16 (Adobe PDF)

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Funded by The Robert Wood Johnson Foundation, ERIU is a five-year program shedding new light on the causes and consequences of lack of coverage, and the crucial role that health insurance plays in shaping the U.S. labor market. The Foundation does not endorse the findings of this or other independent research projects.