March 16, 2005

Medicaid Subsidies Crucial to Working Mothers

Work Supports Help Keep Women in Labor Force

For Immediate Release: March 16, 2005

Contact: Debi Kar, 202-387-5080

As Congress debates President Bush’s proposed cuts to Medicaid, the Center for Economic and Policy Research (CEPR) examines the importance of the health care program in a new report on work supports, titled "When Done Right, Work Supports Work: Medicaid and Mothers' Employment and Wages." CEPR economist Heather Boushey finds that work supports such as Medicaid make the difference in keeping working mothers in the labor force.

Work supports generally focus on the very poor, overlooking those working in the low-wage labor market. While middle-income workers have access to work supports through their employer or by direct purchase, low-income workers end up without access to work supports from either the public or the private sphere. Dr. Boushey’s research finds that many women leaving Medicaid fall into this gap, making it difficult to stay on the job.

Yet when work supports include low-wage workers, they can allow for a seamless transition from public to privately provided services and keep working women in the labor force. The report’s findings indicate that mothers leaving Medicaid who find a job with health benefits are nine times more likely to stay employed than mothers who leave Medicaid without finding such a job. Furthermore, those ex-Medicaid recipients who find a job with health benefits are just as likely to stay employed as mothers who were never on Medicaid.

The stated intention of welfare reform was to encourage mothers on welfare to move into the labor market and to keep working mothers from falling back on welfare. CEPR’s research confirms that work supports can facilitate the transition to stable employment. Moms who had been on Medicaid generally have lower wages than other mothers, but those able to keep Medicaid until they find a job with health benefits are better able to stay in the job market.

Currently, few mothers leaving Medicaid make the transition to employer-based health insurance. During the slow recovery of the early 2000s, less than a quarter of women who left Medicaid found a job with health benefits. The chances of acquiring employer-provided health insurance were slightly higher during the strong labor market of the late 1990s, when more than a quarter of the mothers leaving Medicaid had employer-based health insurance. Medicaid benefits are simply cut too soon as most working mothers are unable to obtain jobs with health benefits.

Latina women have the hardest time accessing employer-based health insurance. In the late 1990s, 12.9 percent of African Americans and whites moved from Medicaid to employer-provided health care, while only 7.8 percent of Latinas made the transition.

Cuts in funding to the Medicaid program, without measures to fill this gap, will make the problem worse. In the early years of the decade, when states faced budget crises, many cut access to work supports for the working poor, which then limited these families’ ability to succeed in the labor market. This research shows the risks in cutting benefits for workers who cannot access work supports through employer-based plans.