The Effect of the Affordable Care Act Medicaid Expansion on the Labor Force

As of January 2018, thirty-three states have adopted the Affordable Care Act (ACA) Medicaid expansion. There is an emerging literature to study the effects of ACA Medicaid expansion on various outcomes, such as insurance coverage, health status, and labor supply. For example, a study from the Congressional Box Office projects that the U.S. labor supply will decrease 1.5-2% from 2017 to 2024 because of this expansion. In a recent paper, Ayyagari (2017) argues that because employer sponsored retiree benefits are declining and Medicaid coverage is expanding, retirement age will decrease by 3.6 to 7.2 months. In this paper, I use data obtained from the Current Population Survey (CPS) from 2005 to 2017 to estimate the effect of Medicaid expansion in certain states on the decision to retire early through a difference-in-difference regression. The hypothesis is that the Medicaid expansion through ACA has given people a new incentive to retire earlier, therefore decreasing the labor force. I examine several outcomes, including employment, labor force participation, retirement, and part-time work. The results indicate that states that expanded Medicaid in 2014 increased the likelihood of an individual being employed and participating in the labor force, and decreased the likelihood of doing part time work or retiring. My result contradicts CBO's expectation.