The Short‐Term Effects of the Earned Income Tax Credit on Health Care Expenditures Among US Adults

Objective

To test the hypothesis that the earned income tax credit (EITC)—the largest US poverty alleviation program—affects short‐term health care expenditures among US adults.

Data Sources

Adult participants in the 1997‐2012 waves of the US Medical Expenditure Panel Survey (MEPS) (N = 1 282 080).

Study Design

We conducted difference‐in‐differences analyses, comparing health care expenditures among EITC‐eligible adults in February (immediately following EITC refund receipt) with expenditures during other months, using non‐EITC‐eligible individuals to difference out seasonal variation in health care expenditures. Outcomes included total out‐of‐pocket expenditures as well as spending on specific categories such as outpatient visits and inpatient hospitalizations. We conducted subgroup analyses to examine heterogeneity by insurance status.

Principal Findings

EITC refund receipt was not associated with short‐term changes in total expenditures, nor any expenditure subcategories. Results were similar by insurance status and robust to numerous alternative specifications.

Conclusions

EITC refunds are not associated with short‐term changes in health care expenditures among US adults. This may be because the refund is spent on other expenses, because of income smoothing, or because of similar refund‐related variation in health care expenditures among noneligible adults. Future studies should examine whether other types of income supplementation affect health care expenditures, particularly among individuals in poverty.