How Much Do Outside Options Matter? The Effect of Subsidized Health Insurance on Social Security Disability Insurance Benefit Receipt

Abstract

New government health insurance programs may affect participation in existing safety-net benefits that provide health insurance as a secondary aim. We examine whether the outside options for health insurance made available by the Affordable Care Act affected Social Security Disability Insurance (DI) application decisions. Using the universe of U.S. individual income tax records spanning 2007-2016, we first estimate the effect of Medicaid expansions using a state difference-in-differences identification strategy, but find small and statistically insignificant estimates. However, when we estimate the effect of being eligible for high vs. low Marketplace subsidies based on geography, we find some evidence consistent with subsidies increasing DI claiming among those with prior access to Employer Sponsored Insurance, and decreasing DI claiming otherwise. Overall, we find suggestive evidence that outside options for health insurance do matter, though magnitudes are small and results are statistically precise only for Marketplace coverage.

Keywords: Affordable Care Act; Disability Insurance; Marketplace Insurance; Medicaid Expansion.