Saving babies: The efficacy and cost of recent changes in the Medicaid eligibility of pregnant women

A key question for health care reform in the United States is whether expanded health insurance eligibility will lead to improvements in health outcomes. We address this question in the context of the dramatic changes in Medicaid eligibility for pregnant women that took place between 1979 and 1992. We build a detailed simulation model of each state's Medicaid policy during this era and use this model to estimate (1) the effect of changes in the rules on the fraction of women eligible for Medicaid coverage in the event of pregnancy and (2) the effect of Medicaid eligibility changes on birth outcomes in aggregate Viral Statistics data. We have three main findings. First, the changes did dramatically increase the Medicaid eligibility of pregnant women, but did so at quite differential rates across the states. Second, the changes lowered the incidence of infant mortality and low birth weight; we estimate that the 30-percentage-point increase in eligibility among 15-44-year-old women was associated with a decrease in infant mortality of 8.5 percent. Third, earlier, targeted changes in Medicaid eligibility, which were restricted to specific low-income groups, had much larger effects on birth outcomes than broader expansions of eligibility to women with higher income levels. We suggest that the source of this difference is the much lower take-up of Medicaid coverage by individuals who became eligible under the broader eligibility changes. Even the targeted changes cost the Medicaid program $840,000 per infant life saved, however, raising important issues of cost effectiveness.