The University of Michigan
Welfare Reform Reduced Public Coverage, Increased Employer Coverage Among Immigrants
According to research conducted by Harvard University economist George Borjas and funded by the Economic Research Initiative on the Uninsured (ERIU) at the University of Michigan, while welfare reform reduced the level of Medicaid coverage for immigrants as a whole, many immigrants were able to obtain employer-sponsored coverage (ESI). The analysis shows that immigrants residing in states with less generous public assistance benefits were significantly more likely to have ESI than immigrants living in states that offered more generous aid.
Declines in welfare and Medicaid participation were much steeper among immigrants than natives. The law’s chilling effect on immigrant participation in public programs was moderated by increases in labor force participation. Labor force participation was increasing for many groups during the economic boom of the late 1990’s. Although Borjas’ research controls for this boom, results may differ for time periods when the economy is weak or in a recession.
George Borjas, Robert W. Scrivner Professor of Economics and Social Policy at Harvard University’s John F. Kennedy School of Government, focuses his research on the economic impact of immigration. Borjas recently authored a paper, “Welfare Reform, Labor Supply, and Health Insurance in theImmigrant Population,” for ERIU.
Q: Did you expect immigrants to pick up employer sponsored insurance (ESI) coverage at the rate they did after welfare reform?
A: I was very surprised because I didn’t expect the labor supply response to be that strong. I thought for sure that disadvantaged immigrants cut off from Medicaid would show up eventually in the uninsured rates. I was truly surprised that it didn’t.
Q: Why did immigrants’ ESI coverage rates rise in the face of welfare reform and cuts in Medicaid, particularly in states with less generous benefits?
A: When the threat of getting cut off was enacted through the welfare reform legislation a lot of immigrants went back to work. One could say that maybe this was the late 1990s so that it was a booming economy that attracted a lot of people to work, but in my work I adjust for these economic changes. It’s really a very simple story: for immigrants who were potentially cut off from Medicaid, many of them went to work and were able to get health insurance coverage through their jobs.
Q: It’s not as though immigrants have an easy time getting ESI. Don’t immigrants have a higher rate of being uninsured?
A: A very large fraction of immigrants are not covered. Only 12 percent of natives are not covered by insurance. For immigrants, it’s 32 percent.
Q: What do your findings say about Medicaid and public health insurance coverage crowding out private coverage?
A: Most crowd-out studies look specifically at Medicaid. When I looked at the immigrant population, I examined cutbacks in all public assistance, not just in Medicaid. So maybe that’s one reason I’m finding such a strong effect. Plus for immigrants, it wasn’t just Medicaid that was potentially being cut off, it was Medicaid, cash benefits and food stamps. The combination of all these factors, really a complete removal of the safety net in a sense is what motivated many immigrants to get jobs that brought in employer health insurance coverage.
Q: What would you suggest to state policymakers dealing with budget crises?
A: The big picture with immigration and welfare reform really involves the devolution of power to the states. If you take my work at face value, it seems to suggest that states that have replaced the programs cut off at the federal level didn’t really have to, if all they wanted to accomplish was to keep the immigrants covered with health insurance. Even the states that didn’t do this, immigrants did just as well.
Q: What are two of the biggest take-aways for healthcare policymakers from your research?
A: The immigrant population has a particular problem with health insurance coverage. Many of them are not covered. Secondly, welfare reform did not work as expected for this population. One would have expected that welfare reform would have led to a pretty sizeable increase in the already very large number of uncovered immigrants and it did not.
ERIU Working Paper #16 (Adobe PDF)
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.