ILR VOL 58/3.qxd

In a widely cited 1995 paper, Aaron Yelowitz concluded that Medicaid eligibility expansions for children were associated with increased labor force participation and reduced welfare participation among single mothers. The authors of the present study, using data from the 1988–96 Current Population Surveys, reexamine the evidence presented by Yelowitz. They find that Yelowitz's results resulted from two factors: he imposed a restriction on the parameter estimates not predicted by theory and rejected in the data, and he used only one of two income tests that families must pass to be eligible for welfare. The authors conclude that there is no evidence detectable in the CPS data of a relationship between welfare or labor force participation and the Medicaid income limits. ince the advent of " welfare reform " in 1996, which replaced the Aid to Families with Dependent Children (AFDC) program with Temporary Assistance to Needy Families (TANF), there has been strong interest in factors that help single-headed families leave cash assistance. One factor that has received some attention is the link between cash assistance and publicly provided health insurance (Medicaid). Until the late 1980s, virtually the only way for a low-income woman or child to receive Med-icaid was to participate in AFDC. Since leaving AFDC meant losing one's health insurance as well as cash support, and since many low-wage jobs do not offer health insurance, the connection between AFDC and Medicaid provided an additional incentive for a woman to remain on welfare, even if she might otherwise choose to participate in the labor force. Beginning in the late 1980s, however, Medicaid coverage was expanded to children in families with incomes well above the AFDC limits. Separate Medicaid eligibility income limits were established that were linked to the poverty line rather than to a state's AFDC limits, permitting children in low-income working-parent families to qualify for Medicaid despite their