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A number of authors have detailed the history of the Medicaid program,3 as well as the coverage expansions impacting eligibility across the United States throughout the 1980s and

3 _{The Medicaid program dates back to 1965 when the program was officially enacted by Congress as part of}

early 1990s. Arguably, Gruber’s 2003 book chapter, aptly titled “Medicaid”, provides the most comprehensive overview. Given these resources, this section highlights the significant

benchmarks and provisions of these public health insurance expansions that are most relevant to the fundamental research question of this paper.4 Two notes regarding the evolution of Medicaid programs are particularly important to this paper. First, the bundle of goods and services

provided by Medicaid are comprehensive and standardized across all states. Secondly, increases in eligibility stem from two key legislative changes: (1) the removal of the family structure restrictions from benefit receipt, and (2) the tying of income thresholds to some function of the federal poverty level rather than the AFDC payment standard established by the state.

2.2.1 The Scope of Medical Care Provided by Medicaid

As part of the agreement to receive federal funds, the government required that states provide a relatively standardized bundle of goods and services provided under their Medicaid program. Thus, potential medical treatment received during the early childhood years should have been roughly equivalent regardless of the state of residence for children evaluated in this analysis. This is important because the quality of “treatment” evaluated in this analysis should not be strongly dependent upon geography, conditional on time. Consequently, “generosity” in this paper refers to the number of children potentially eligible for public insurance and not the quality of medical treatment possibly received.

whereby participating states received federal grants to help offset a portion of total program costs borne at the state- level. To receive federal funds, states were required to cover select sub-populations, such as individuals qualifying for AFDC, and states could choose to add other groups it deemed as medically needy. By 1972, all states except Arizona had created state-run Medicaid programs; Arizona opted into the program on a limited scale in 1982, only to expand coverage shortly thereafter.

4 _{This overview draws heavily upon the historical overview provided in the Kaiser Family Foundation’s publication}

“Medicaid: A Timeline of Key Developments” (2013) and reports published by the old U.S. General Accounting Office (1991)– a more detailed summary of the developments in Medicaid coverage can be found in Appendix A.

Concerning these legislated benefits over the duration of the program, medical coverage provided has been comprehensive: the wide range of services included physician care, inpatient and outpatient hospital procedures, laboratory and x-ray services, as well as access to skilled nursing facilities. A critical component of this coverage as it applies to health investments in low-income children are the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services, which were enacted under the Social Security Mandates of 1967, and provide

preventative and treatment services including dental, vision, hearing, and mental health. As the name implies, the goals of the EPSDT program are to identify health problems starting at birth, to keep monitoring the development of the child at regular intervals, and to treat the problems once they are discovered. So, where low-income children without Medicaid benefits may wait years to receive a diagnosis and treatment, children with coverage are more likely to receive help in their infancy. In turn, this could potentially eliminate or reduce the negative impact of

debilitating conditions and increase cognitive development during the formative years of early childhood.

2.2.2 Determinants of Medicaid Eligibility

During Medicaid’s early period, the vast majority of those covered by Medicaid received benefits based upon their qualification for AFDC benefits within a particular state. Due to the wide range of criteria used to determine AFDC qualification, a large number of poor children were excluded from public health insurance in the early period because of family structure or

income requirements legislated at the state level.

Historically, qualification for AFDC typically precluded the presence of able-bodied males within the household. This means that low-income children residing within two-parent,

nuclear families were typically not eligible for Medicaid benefits and that AFDC was essentially a program for low-income, single parents. Acknowledging the distortive effects of this policy, legislative changes sought to break this link between AFDC receipt and child Medicaid by expanding eligibility to all children below some multiple of the federal poverty guideline,

regardless of family structure type. As Figure 1 notes, Hispanic and white children are most

likely to reside in two-parent, married families during their early childhood years. Thus, they are the two groups most likely to benefit from the removal of the family structure restrictions on child Medicaid receipt.

Furthermore, since individual states determined the need and payment standards under the state-level AFDC programs, there was tremendous variation in the income level that qualified single-parent families for benefits during the early period of the Medicaid program. For example, Alabama’s monthly need standard for a family of 3 in 1980 was $192 in nominal dollars,

whereas the standard for a high-threshold state such as Vermont was $670. A comparison of these values to the federal poverty guideline of approximately $520 per month for a family of three at the same point in time reveal the potential for a significant number of poor children and families not qualifying for AFDC benefits and Medicaid simply because their states had chosen a low threshold to determine the “needy”.

While minor changes to rules governing Medicaid eligibility occurred before the 1980s,5 the bulk of the coverage expansions occurred during the mid to late 1980s and early 1990s – which were the early childhood years for students graduating after the turn of the 21st century. Under a number of legislative acts which sought to simultaneously limit federal expenditures and

5 _{Despite the failure of President Carter’s push to expand coverage to low-income children under the age of 6 who}

did not qualify for insurance under current state laws in the late 1970s, the notions of separating welfare receipt from Medicaid qualification and the expansion of coverage during early childhood – defined as conception through age 5 – help set the agenda for comprehensive expansions of the 1980s.

expand Medicaid coverage to needy populations during the Reagan administration,6 Medicaid eligibility was extended to a large set of low-income children during early childhood and to their mothers during pregnancy. Details of these incremental expansions have been highlighted in a number of publications (in particular, see Currie and Gruber, 1994; Yelowitz, 1995; Currie and Gruber, 1996a; Currie and Gruber, 1996b) and, thus, I refer the interested reader to Appendix A for more information regarding the key developments in Medicaid expansions to low-income children which affected cohorts examined within this analysis. The key note is that – after the full enactment of the sweeping mandates throughout the 1980s – Medicaid for children in the United States had completed its transition from an optional state program, which was typically tied to AFDC receipt, to a stand-alone program which potentially covered all children at or below some federally mandated multiple of the federal poverty line, regardless of family structure type.