Spousal Labor Market Effects from Government Health Insurance: Evidence from a Veterans Affairs Expansion

in more recent work (Kapinos 2009). A related literature finds that when SCHIP
or Medicaid becomes available to children, women reduce their labor supply.
However, this type of health insurance directly disincentivizes work through
eligibility requirements (e.g. Montgomery and Navin 2000, Tomohara and Lee
2007, Winkler 1991, Yelowitz 1995).

In contrast, we examine the effect of a health benefits increase that is not
linked to work and only covers the individual affected, not the entire family. We
use a mid-1990s expansion of health insurance for U.S. veterans to provide
evidence on the effects of expanding health insurance availability on the labor
supply of wives of affected veterans. Using data from the Current Population
Survey, we employ a difference-in-differences strategy to compare the labor
market behavior of the wives of older veterans and non-veterans before and after
the VA health benefits expansion to test the impact of public health insurance on
these spouses. This experiment models the potential impact on women’s labor
supply if the husband reaches the age of Medicare eligibility earlier than his wife.
Because wives in these cohorts are generally younger than their husbands, a
husband’s acquisition of VA coverage creates a situation analogous to a
household in which the husband reaches the age of Medicare eligibility before his
wife does.

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