The effect of medicaid on cash assistance to the aged and disabled poor

Abstract

The Supplemental Security Income (SSI) Program is a means-tested entitlement program that pays cash benefits to needy aged, disabled, and blind persons in the United States. Since the program's implementation in 1974, the real value of benefits has declined precipitously. This article assesses the extent to which the increased cost of Medicaid and changes in recipiency rates and voter income explain the decline. The theoretical model is a "charity" mode in which voters have altruistic preferences. The empirical results indicate that Medicaid expenditures on the aged and disabled poor are only a weak substitute for cash benefits - the hypothesis that a one-dollar increase in Medicaid benefits causes a one-dollar decrease in cash payments is strongly rejected. The small negative own-price and small positive income elasticities found for the SSI program are consistent with results from studies that have looked at the Aid to Families with Dependent Children (AFDC) program. © 2003 Sage Publications.