The Economic Rationale for Investing in Children: A Focus on Child Care. An Overview of Recent Extensions of Eligibility for Health Insurance to Low Income Pregnant Women, Infants, and Children


The United States does not have universal health insurance coverage, but does have public insurance programs which cover the elderly, the disabled, and some women and children in poor families. Medicaid is the government program that covers the latter group. Medicaid was implemented in the late 1960s and early 1970s and was phased in at different rates across the states. From its inception until the mid-1980s, Medicaid coverage was tied to the receipt of cash welfare benefits. Income thresholds for welfare varied widely across states, but in general only female-headed households were eligible for benefits. Hence, as many as 30 percent of poor children lacked health insurance coverage (Bloom, 1990). A good deal of research has established that uninsured children have lower utilization rates, a less efficient distribution of utilization across sites of care, and worse health outcomes than other children (c.f. Kasper, 1986; Short and Lefkowitz, 1992).

In response to this lack of coverage and to rates of mortality and morbidity among U.S. children that were higher than in many other developed countries, the U.S. government began expanding Medicaid eligibility to previously uncovered groups of pregnant women and children in the mid-1980s. By July 1, 1991, states were required to cover all children born after Sept. 30, 1983 whose family incomes were below the poverty line. Currie and Gruber (1996a) estimate that these Medicaid expansions roughly doubled eligibility for Medicaid coverage among women of child bearing age from 15 to 35 percent, while Currie and Gruber (1996b) find that eligibility among children increased from 15 to 30 percent. It may surprise readers who think of the U.S. medical insurance system as primarily private to learn that approximately 40 percent of births were paid for by Medicaid in 1995 (National Governor's Association, 1997).

Typically, states were first given the option of extending coverage to specific groups, and then required to do so. The important point is that since states took up these options at different rates, and programs varied tremendously in terms of generosity to begin with, there has been a great deal of variation across states in both the income thresholds and the age limits governing Medicaid eligibility(2). This variation in eligibility across states, years, and child age groups, can be used to identify the effects of eligibility for public insurance among the poor and near-poor children who became eligible.

As discussed above, SCHIP is the most recent in this line of federal initiatives. It is aimed at covering children in somewhat higher income families (families with incomes up to 200 percent of poverty). States have the option of continuing to expand their Medicaid programs, or of creating a new program.