Working Paper

Abstract

Precipitated by the legislative decision to decouple child Medicaid benefits from welfare receipt, the number of young children qualifying for public health insurance grew markedly throughout the 1980s and early 1990s. From a baseline of roughly 15 percent in the average state at the beginning of the decade, the rate increased to more than 40 percent of all young children in the United States by the time all federal mandates were fully enacted in 1992.

This paper extends the academic literature examining early childhood investments and longer-term human capital measures by exploring whether public health insurance expansions to low-income children led to a greater number of high school completers in the 2000s. Building on the literature that uses the generosity of a state’s Medicaid program as a time-varying, exogenous source of variation in a quasi-experimental design, the author finds a positive and statistically significant relationship between Medicaid eligibility during early childhood – defined as conception through age 5 – and longer-term high school completion rates.

Completion is examined in two forms: the dropout rate and the traditional four-year high school graduation rate. Intent-to-treat estimates range from a 1.9 to 2.5 percentage point (pp) decrease in the dropout rate for each 10 pp increase in early childhood years covered by the state-level Medicaid program. The same 10 pp increase in child Medicaid program generosity reveals increases of 1.0 to 1.3 pp when applied to graduation rates, indicating that completion gains are propelled by increases in traditional diplomas. Furthermore, results appear to be driven by Hispanics and white students, the two groups which experienced the greatest within-group eligibility increases due to the decoupling of child Medicaid from the Aid to Families with Dependent Children program.