This paper examines the impact of recent state-level Medicaid policy changes that expanded eligibility for family planning services to higher income women and to Medicaid clients whose benefits would expire otherwise. We begin by establishing that the income-based policy change led to a substantial increase in the number of program recipients. We then examine Vital Statistics birth data from 1990 to 2003 and determine that it also reduced overall births to non-teens by about two percent and to teens by over four percent. Our estimates suggest a nearly nine percent reduction in births to women age 20-44 made eligible by the policy change. We supplement our state-level analysis with an investigation of individual-level data from the 1988, 1995, and 2002 National Surveys of Family Growth (NSFG) to examine the impact of these policies on sexual behavior and contraceptive use. Evidence from this analysis suggests that the reduction in fertility associated with raising income thresholds for eligibility was accomplished via greater use of contraception. Our calculations indicate that allowing higher income women to receive federally-funded family planning cost on the order of $6,800 for each averted birth.

I. Introduction

Roughly one-third of all births between 1997 and 2002 in the United States were unintended by the mother based on data available from the National Center for Health Statistics (2005). This rate skyrockets to almost three-quarters for births to teens. A popular response to such jarring statistics is to increase access to family planning services that can help provide the means necessary to reduce unintended childbearing. In fact, a 2006 public opinion poll found that 89 percent of American adults believe that people “should have more access to information about birth control options,” and 81 percent believe that “providing people with access to birth control is a good way to prevent abortions” (Wall Street Journal Online, 2006).

On its face it might seem obvious that providing contraception to women will reduce the number of unwanted pregnancies and births. Of course, behavioral responses to policy changes are rarely so straightforward. Women may choose not to take advantage of the services and many who do would have obtained contraception privately otherwise. Women may also increase their level of sexual activity, canceling out the effectiveness of any increased use of contraception. Ultimately, the impact on behavior is an empirical question.