Coe and Rupp 2013 — Does Access to Health Insurance Influence Work Effort Among Disability Cash Benefit Recipients

Summary

Tests the "Disability Insurance (DI) lock hypothesis" — that tying Medicare (DI) or Medicaid (Supplemental Security Income, SSI) to benefit receipt deters exits for work, analogous to job lock in the employer-sponsored insurance literature. Using state-level variation in non-group insurance regulation, Medicaid buy-in programs, and Medicaid generosity as identifying variation in Social Security Administration (SSA) administrative data, the paper finds little aggregate DI lock (consistent with success of extended Medicare/Medicaid eligibility provisions), but significant heterogeneous effects: SSI lock persists for moderate-expenditure beneficiaries, and DI lock persists for those without supplemental private insurance.

Key Claims

• Aggregate DI lock is small: Overall, state health insurance access has little relationship to whether beneficiaries work or leave the rolls — the legislative extensions of Medicare ($93$ months post-exit) and Medicaid (Section 1619(b) for SSI) appear to have worked.
• SSI lock persists for moderate-expenditure beneficiaries: Those with some Medicaid expenditures (neither zero nor catastrophically high) are more likely to work in states with strict non-group regulation or generous Medicaid eligibility — indicating remaining SSI lock that state policy can alleviate.
• DI lock persists for the privately uninsured: Beneficiaries without access to supplemental private insurance (Medicare as sole coverage) remain DI-locked; Medicaid buy-in programs specifically help this subgroup.
• High-expenditure beneficiaries are unresponsive: Those with the highest medical expenditures are insensitive to any health insurance variation — disability severity dominates financial incentives.
• SSI dampens the SGA cliff: Suggestive evidence that DI beneficiaries who could qualify for SSI after losing DI benefits (because SSI tops up income and provides Medicaid access between the substantial gainful activity (SGA) level and $2\times$ Federal Benefit Rate (FBR) $+ \$85$) face a smaller effective work disincentive than DI-only beneficiaries.
• Program exit rates are very low overall: $\approx 1\%$ of DI beneficiaries and $\approx 4\%$ of SSI beneficiaries exit the rolls per year due to work-related reasons, confirming that health insurance lock is a marginal factor around an already-large work-disincentive structure.

Concepts Introduced or Extended

• Employment Lock (DI lock subsection — disability analog to job lock)

Entities Mentioned

• Norma B. Coe
• Kalman Rupp
• Disability Insurance Program
• Supplemental Security Income

Quotes

"Overall, there is little relationship between state health insurance access and beneficiaries working or leaving the disability rolls. This may reflect the success of previous reforms extending Medicaid and Medicare eligibility for people leaving the DI and/or SSI rolls for work-related reasons."

"Our findings suggest that different state-level policies assist the disabled to leave the rolls in certain situations. We find that Medicaid buy-in programs ease DI-lock among beneficiaries with medical expenditures and among beneficiaries without access to private health insurance."

My Take

Methodologically clean identification using state policy variation. The main contribution is decomposing the aggregate null into economically meaningful subgroups: the null hides residual lock among specific populations that targeted Medicaid buy-in or non-group regulation can help. The SGA-cliff dampening result is suggestive only — limited precision. The paper predates the Affordable Care Act (ACA); the aggregate DI lock result could be different now that marketplace coverage has reduced the penalty of losing Medicare. The $\approx 1\%$ annual exit rate from DI underscores how marginal health insurance is as a constraint relative to the broader work-disincentive structure.