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Welfare reform and health insurance of immigrants

Health Services Research, June, 2005 by Neeraj Kaushal, Robert Kaestner

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) changed legal immigrants' access to public health insurance in two ways: directly, by denying Medicaid benefits to immigrants who arrived in the U.S. after August 1996, and indirectly, by denying or limiting immigrant participation in Temporary Aid to Needy Families (TANF), which is an important entry point into Medicaid. An explicit objective of Federal law was to restrict immigrant use of means-tested programs. However, many state governments responded to the immigrant provisions in PRWORA by creating substitute means-tested programs for those immigrants who were adversely affected by the Federal policy.

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Despite this inclusive approach adopted by several states, immigrants' dependence on means-tested programs such as TANF, Medicaid, and Food Stamps fell sharply subsequent to the passage of the Federal law, raising concerns that the fear or stigma associated with PRWORA may have had a "chilling" effect, causing even those immigrants who were eligible for benefits not to seek them (Fix and Passel 1999). The decline was particularly noticeable for Medicaid, but its cause is unclear. The decline in Medicaid may have been a consequence of the provisions in PRWORA, or of the stigma attached to it; or the decline may have been the result of other factors such as the economic boom of the nineties. To date, research has not clearly established the relative importance of these or other causes.

If PROWRA was responsible for a decrease in immigrant health insurance coverage, it would most likely reduce health care utilization by poor immigrant families, and possibly adversely affect their health. However, if welfare reform induced immigrants to seek jobs that offered health insurance (reverse of crowd-out effect), the decline in Medicaid use may not have any adverse effect on immigrant health (Borjas 2003).

In this paper, we investigate whether PRWORA had an effect on the health insurance of low-educated, unmarried foreign-born women and their children, and compare that with the effect of welfare reform on the health insurance of native-born families with similar characteristics. We also study if newly arrived immigrants were affected by PRWORA more than their older cohorts. Finally, we examine the validity of the "chilling" hypothesis, which posits that immigrants responded not to the actual provisions of the law, but to the stigma or fear associated with it. To do so, we estimate the effect of PRWORA on new immigrants living in states with substitute TANF and/or Medicaid programs and on those living in states that do not provide these benefits to new immigrants. If the two groups were similarly affected by the policy change, it would be evidence consistent with the "chilling" hypothesis.

IMMIGRANTS, HEALTH INSURANCE, AND PRWORA

PRWORA altered legal (i.e., legal permanent residents) immigrants' access to public health insurance by denying immigrants who arrived in the U.S. after August 1996 Medicaid coverage for all but emergency care in the first five years of their residency. However, 15 states, including some large immigrant states such as California and Illinois, created substitute Medicaid programs for newly arrived legal immigrants. In the remaining states, which also include a number of major immigrant states like Texas, Florida, and New Jersey, newly arrived legal immigrants do not have access to Medicaid. (1) Legal immigrants who arrived prior to August 1996 continue to have access to Medicaid in all states except Wyoming and illegal (i.e., illegally residing in the United States) immigrants continue not to have access to Medicaid.

PRWORA also denied post-August 1996 legal immigrants TANF in the first five years of their residency in the U.S. TANF is an important entry point into Medicaid, and so its denial may restrict immigrant use of public health insurance. Again, 19 states used state level funds to create substitute TANF programs to meet the welfare needs of newly arrived legal immigrants during the 5-year bar. Illegal immigrants and foreign-born persons on temporary visas experienced no change in policy, as they remain ineligible for TANF.

Finally, like citizens, all legal immigrants were potentially affected by the policy changes of PRWORA, which instituted time-limited benefits, imposed work requirements and sanctioned benefits if a recipient failed to meet the work requirements. The basic goal of PRWORA was to reduce dependence on public assistance and encourage economic self-sufficiency through work. As a result many low-income women were diverted from or encouraged to leave public assistance and this may have adversely affected their health insurance status. Women who leave TANF are eligible for transitional Medicaid benefits, but these benefits end after one year. Moreover, administrative hurdles may reduce take-up rates for transitional benefits. As the jobs that low-income women typically get after leaving welfare do not provide health insurance coverage, a transition from welfare to work may also mean transition from state-provided insurance to no insurance. And there are no transitional benefits for women who are deterred from entering welfare. As many of these women are employed, their earnings may push them over the very low Medicaid income-eligibility thresholds for adults.

Health Care Industry

Welfare reform and health insurance of immigrants

Health Services Research, June, 2005 by Neeraj Kaushal, Robert Kaestner

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