Income Manipulation from Subsidized Health Insurance: Evidence from Massachusetts∗

This paper analyzes the income manipulation to thresholds in eligibility for a subsidized program in the Massachusetts health insurance reform, the statelevel precursor to federal health care reform. Using data from the American Community Survey, I test for the existence of income manipulation and nd clear evidence around the thresholds of 150 percent and 300 percent of Federal Poverty Level. The lower threshold falls between plans with zero and positive out-ofpocket premiums, and the e ect is concentrated among the self-employed. The higher threshold is the upper limit of income for the eligibility of subsidy, and is concentrated among wage workers. I also estimate the elasticity of labor supply with respect to wage rate using the manipulation evidence, and calculate the welfare loss due to the subsidized program.