This paper examines the association between household healthcare expenses and participation in the Supplemental Nutrition Assistance Program (SNAP) when moderated by factors associated with financial stability of households. Using a large longitudinal panel encompassing eight years, this study finds that an inter-temporal increase in out-of-pocket medical expenses increased the likelihood of household SNAP participation in the current period. Financially stable households with precautionary financial assets to cover at least 6 months worth of household expenses were significantly less likely to participate in SNAP. The low income households who recently experienced an increase in out of pocket medical expenses but had adequate precautionary savings were less likely than similar households who did not have precautionary savings to participate in SNAP. Implications for economists, policy makers, and household finance professionals are discussed.
The Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, provides benefit payments to purchase food for households meeting the eligibility criteria. SNAP benefits have been found to help low-income families smooth their consumption (Gundersen and Ziliak 2003) and serve as an economic safety net in the events of negative income shocks. SNAP participation rates have increased in the past decade (Zedlewski and Rader 2005), reaching over 47 million recipients in 2012 (Food and Nutrition Services
[FNS], U.S. Department of Agriculture [USDA] 2013). Recent increases in participation have been largely explained by the unemployment rates and the number of people in poverty (Andrews and Smallwood 2012;Klerman and Danielson 2011;Lim 2011). Recent policy modifications at both federal and state levels, such as reductions in certification process and more lenient vehicle exemption, were also found to have led to increases in SNAP participation (Klerman and Danielson 2011).
Financial instability and liquidity constraint of individual households have been associated with SNAP participation (Mabli & Ohls, 2012). Households that experience financial strain were more likely to participate in SNAP (Purtell, Gershoff, and Aber 2012). While the indicators of household income loss such as unemployment, employment changes, and job instability have been associated with SNAP participation (Mabli and Ohls 2012;Yen, Bruce, and Jahns 2012), the impact of unexpected major expenses such as medical bills has rarely been studied in relation to SNAP participation. With increased health care expenditures and out-ofpocket costs, medical expenses have become a major contributor to household financial instability (Collins et al. 2008). On another note, liquidity constraints diminish the financial stability of households (Cox and Jappelli 1993;Grafova 2011;Grenninger et al. 1996). Assets and liquidity may help households in coping with financial shocks without turning to public assistance such as SNAP. However, many households are inadequately prepared to deal with the sudden increases in out-of-pocket medical expenses (Feenberg and Skinner 1994;McIntyre et al. 2006;Nielsen, Garasky, and Chatterjee 2010). Increases in out-of-pocket medical expenses can particularly hurt households that do not have adequate reserves of emergency funds to buffer such financial shocks (Kim and Lyons 2008;Kim, Yoon, and Zurlo 2012).
The purpose of this research is to examine the effect of health care burdens on the SNAP participation of households. This study specifically examines the following three research questions: (1) whether increases in households’ out-of-pocket medical expenses are associated with their likelihood of participating in the SNAP, (2) whether households’ liquidity constraint is associated with their likelihood of participating in SNAP, and (3) whether the absence of liquidity constraint reduces the association between out-of-pocket medical expenditure and SNAP participation.
Medical expenses have become a major cause of households’ financial instability. Many Americans are struggling to pay their medical bills and accumulating large amounts of medical debt. When compared with higher-income households, financial burden of medical expenses was greater for low-income families (Cohen and Kirzinger 2014;Patel, Brown, and Clark 2013) and for the uninsured (Bernard, Johansson, and Fang 2014). Households with special medical needs often experienced high levels of financial strain (Lindley and Mark 2010). About a quarter of those who were uninsured in the previous year were unable to pay their medical bills (Collins et al. 2008). Having private health insurance coverage offered households little protection from financial burden of medical bills due to high premium and out-of-pocket costs (Cohen, Gindi, and Kirzinger 2012).
The highest levels of financial burden of medical cost were found in poor (below the Federal Poverty Line [FPL]) and near-poor families (100-200% FPL) (Cohen et al. 2012). Ketsche, Adams, Wallace, Kannan, and Kannan (2011) examined health care expenditures including health insurance and out-of-pocket health care spending by income group. They found that lower-income families paid a larger share of their incomes on health care than higherincome families did. Out-of-pocket expenditures for low-income families represented a larger proportion of the family income and thus lead to relatively greater financial burden (Witt et al. 2011). Galbraith, Wong, Kim, and Newacheckal (2005) found that lower-income groups reported greater out-of-pocket expenditures per $1,000 income than other income groups.
Similarly, Selden (2009) showed that lower-income families were more likely to incur out-ofpocket expenditures exceeding 20% of family income compared to higher income families.
Families with low income, children, and limited or no insurance coverage experienced higher financial burdens of medical care
This content is AI-processed based on open access ArXiv data.
