By boosting children’s future earning potential and therefore income tax payments, expanding Medicaid may be a better investment than many states realize, according to new federal analysis (Source: “Study: Medicaid expansion boosts kids' incomes and government tax revenue,” Vox, Jan. 12, 2015).
According to new analysis of IRS data by National Bureau of Economics Research, children eligible for the public program earn more as adults. They pay more taxes on those earnings and, over the course of their lifetime, researchers estimate that they'll ultimately repay 56 percent of the Medicaid dollars spent on them.
Yale health economist Amanda Kowalski, working with researchers at the Treasury's Office of Tax Analysis, was able to look at tax filing data from parents in the early 1980s, right when states were starting to expand health coverage to low-income kids through the new Children's Health Insurance Program (CHIP).
Each additional year of Medicaid eligibility increased cumulative tax payments by $247 at age 28. To put that in perspective, the average 28-year-old woman has paid $18,114 in taxes — so the increase is small, but statistically significant. For men, the increase is smaller ($127) and on a larger tax base ($23,025, mostly because men tend to earn more than women).