How Do States Formulate Medicaid and SCHIP Policy? Economic and Political Determinants of State Eligibility Levels

We exploit the existence of substantial variation in state policies toward public health insurance for children between 1990 and 2002 to estimate the economic and political determinants of state eligibility levels. Controlling for state and year effects, eligibility levels are not significantly associated with either the percentage of uninsured children in the state or the eligibility policy of neighboring states; further, variation in eligibility levels within state is negatively associated with both the federal matching rate and state fiscal capacity. We also observe that state political preferences, measured by the Democrats’ share of seats in the lower chamber of the state legislature, are a relatively important a determinant of state eligibility levels. However, other political factors, such as party control of state government, voter turnout, legislative term limits and campaign finance regulations do not influence state eligibility levels.  The authors gratefully acknowledge the support of the Robert Wood Johnson Scholars in Health Policy Research Program for making this collaboration possible; Milyo also acknowledges the support of the Hanna Family Fellowship and the Center for Applied Economics at the University of Kansas. The authors thank Jonathan Rork and Brian Hill for helpful suggestions on an earlier draft and Kai Filion for excellent research assistance. All errors are our own.