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Figure 3
New Mexico's Low-Wage Trap (2002)
$50,000
Total Income, Single Mother of Two
Poverty Line
$40,000
Wal-Mart
Wal-Mart
$30,000
Los es
(starting)
(avg.)
Min.
Los es
Children's
Wage
Child-Care
Medicaid
Subsidy
$20,000
$10,000
As Earnings Increase, Family Gradually Loses
Government Aid (e.g., EITC) & Pays Higher Taxes
$0
$10,000
$20,000
$30,000
$40,000
$50,000
Earnings
Source: U.S. Department of Health and Human Services' marriage calculator, and author's calculations.
would make financial independence more diffi-
In a survey of economic studies examining
cult even for those who do not enroll.
factors that contribute to longevity, the New
York Times reported that education appears
Poor Fiscal Sense
to have the greatest impact, while "factors
Expanding SCHIP also would be fiscally
that are popularly believed to be crucial--
unwise. First, expanding coverage may not be
money and health insurance, for example,
pale in comparison."29 According to RAND
the best way to improve the health of target-
ed children. Although policymakers expect
Corporation health economist James Smith,
that expanding Medicaid and SCHIP will
health insurance "is vastly overrated in the
improve children's health, economists have
policy debate" over how to increase life
expectancy.30
found no evidence that these programs are a
cost-effective way of doing so. Economists
One reason that Medicaid and SCHIP may
Helen Levy and David Meltzer write:
not be cost-effective vehicles for improving
health is that expanding those programs
Economists
It is clear that expanding health insur-
reduces private health insurance coverage.
have found no
ance is not the only way to improve
Families often substitute Medicaid and
health. . . . Policies could also be aimed at
SCHIP for private coverage. Similarly, employ-
evidence that
factors that may fundamentally con-
ers often cut or eliminate health benefits when
Medicaid and
tribute to poor health, such as poverty
their workers become eligible for those pro-
SCHIP are cost-
and low levels of education. There is no
grams. It is well-established that Medicaid and
SCHIP "crowd out" private health insurance.31
evidence at this time that money aimed at
effective ways of
improving health would be better spent
Crowd-out makes expansion of public
improving
on expanding insurance coverage than
programs a costly way of increasing the num-
on any of these other possibilities.28
children's health.
ber of people with health insurance. A recent
5