As the federal government lumbers forward to implement Obamacare, liberals have exulted in the fact that millions more low-income Americans will now be covered by Medicaid, under the assumption that this will improve the health of the most vulnerable in ways heretofore neglected. But the benefits of this expansion are worth a healthy dose of skepticism: As Avik Roy has exhaustively documented, Medicaid is essentially a disastrous health-insurance program, and it looks like it is especially unhelpful at the margins, when extended to higher-income recipients.
But Medicaid’s problems don’t mean there aren’t other elements of the social safety net that do work well for the poor, and improve their health outcomes. One of them is the earned-income tax credit — in fact, the more scholars delve into the EITC, the better and better it looks, not least because it’s been proven to increase employment among the poor. And a new study from the National Bureau of Economic Research now suggests that the EITC can have significant benefits for infant health, too. The abstract explains:
We find that increased EITC income reduces the incidence of low birth weight and increases mean birth weight. For single low education (<= 12 years) mothers, a policy-induced treatment on the treated increase of $1000 in EITC income is associated with 6.7 to 10.8% reduction in the low birth weight rate, with larger impacts for births to African American mothers. These impacts are evident with difference-in-difference models and event study analyses. Our results suggest that part of the mechanism for this improvement in birth outcomes is the result of more prenatal care and less negative health behaviors (smoking). We find little role for changes in health insurance. We contribute to the literature by establishing that an exogenous increase in income can improve health, and illustrating a health impact of a non-health program. More generally, we demonstrate the potential for positive external benefits of the social safety net.
The paper notes that the infant-health benefits of an extra $1,000 in the EITC outdo an equivalent increase in food-stamp aid (examined in Almond et al. 2011). Further, there were positive effects associated with the fact that EITC-augmented incomes enabled some families to move from Medicaid to private insurance (a dynamic surely further reinforced by the fact that it increases employment, too). Unfortunately for the “53 percenters” who would like poor Americans to pay more taxes, the EITC might well be precisely the kind of welfare program we want.