WORK INCENTIVES OF MEDICAID BENEFICIARIES AND THE ROLE OF ASSET TESTING |
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| Authors: | Svetlana Pashchenko Ponpoje Porapakkarm |
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| Affiliation: | University of Georgia, U.S.A. |
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| Abstract: | Should asset testing be used in means‐tested programs? Focusing on Medicaid, we show that in the asymmetric information environment, there is a positive role for asset testing. Our tool is a general equilibrium model with heterogeneous agents. We find that 23% of Medicaid enrollees do not work in order to be eligible. These distortions are costly: If Medicaid eligibility could be linked to (unobservable) productivity, this results in substantial welfare gains. We show that asset testing can achieve a similar outcome when asset limits are allowed to be different for workers and nonworkers. |
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