The Effect of Medical Need and Medicaid on AFDC Participation

This paper investigates the need for medical insurance and the effect of Medicaid eligibility rules on the behavior of female-headed households with children, using 1980 data from the National Medical Care Utilization and Expenditure Survey. It estimates the extent to which health problems and the parameters of the Medicaid program affect AFDC participation, labor market involvement, and Medicaid usage among the Medically Needy. Health problems significantly increase AFDC participation, but neither the presence of a Medically Needy program nor the value of Medicaid insurance coverage has significant effects on AFDC usage. The Medically Needy program appears to be used by households which experience significant medical problems, but which would be uninsured if this program were not available.