SUBSIDIZED CONTRACEPTION, FERTILITY, AND SEXUAL BEHAVIOR
Melissa S. Kearney and Phillip B. Levine*
Abstract—We examine 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 show that the income-based policy change reduced overall
births to non-teens by about 2% and to teens by over 4%; estimates
suggest a decline of 9% among newly eligible women. The reduction in
fertility appears to have been accomplished via greater use of contracep-
tion. 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
R
OUGHLY 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% of American adults believe that people
“should have more access to information about birth control
options,” and 81% 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 contra-
ception 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.
In this paper, we provide evidence on this point by
examining recent expansions of eligibility for Medicaid
family planning services to women who would not other-
wise be covered. Between December 1993 and March 2007,
25 states received waivers from the federal government to
extend this coverage (Guttmacher Institute, 2007a). A brief
review of several states’ waiver requests shows that an
important goal of these waivers is to reduce unintended
pregnancies. We evaluate the effectiveness of these waivers
in reducing births, as well as their impact on abortions,
sexual activity, and contraceptive use. Because these poli-
cies were introduced in different states at different times, we
are able to employ difference-in-difference methods to iden-
tify a causal connection. We implement these methods using
a wide array of data sources, including Vital Statistics birth
data, abortion data from the Guttmacher Institute, and mi-
crodata from the 1988, 1995, and 2002 National Surveys of
Family Growth (NSFG) regarding sexual activity and con-
traceptive use. We also confirm that these waivers increased
the number of women receiving Medicaid-funded family
planning services using data from the Centers for Medicare
and Medicaid Services (CMS).
The results of our analysis show that one type of these
waivers, those that increase income limits for eligibility,
were particularly effective. We show that these policies
dramatically increased the number of women receiving
Medicaid-funded family planning services. We go on to
demonstrate that they reduced overall births to non-teens by
about 2% and to teens by over 4%. Scaling these estimates
by the estimated proportion of women in a state made
eligible, we find that births to newly eligible non-teens fell
by almost 9%. Our analysis of individual-level data from the
NSFG implies that the reduction in fertility associated with
income-based waivers is attributable to greater contracep-
tive use; we find no evidence of an effect on sexual activity.
Based on the cost per recipient of family planning services,
we find that each birth that was avoided cost on the order of
$6,800.
II. Background
A. Literature Review
Though advocacy groups, politicians, and much of the
public appears to be optimistic about the potential to de-
crease rates of unwanted births and abortions by expanding
access to contraception, there is very little empirical evi-
dence to date supporting this notion. Kirby (1997, 2001)
provides two extensive reviews of the literature on the
effectiveness of teen pregnancy prevention programs in the
United States, focusing on experimental and quasi-
experimental analyses. Although his 1997 review concludes
that “there is remarkably little research evidence” to support
the conclusion that family planning services prevent teen
pregnancies, his 2001 review is somewhat more optimistic.
There he reports some evidence that programs offering a
large number of services, including family planning, may be
effective. DiCenso et al. (2002) provide a similar review of
programs like this in a larger set of developed countries.
Received for publication April 17, 2007. Revision accepted for publi-
cation October 24, 2007.
* Department of Economics, University of Maryland, and NBER; De-
partment of Economics, Wellesley College, and NBER.
The authors thank Bill Evans, Adam Sonfield, Ted Joyce, two anony-
mous referees, and seminar participants at the University of Maryland, the
University of Connecticut, the University of Virginia, the University of
Chicago, Suffolk University, George Washington University, the Rand
Corporation, the Brookings Institution, and the 2006 APPAM meetings in
Madison, WI, for helpful comments. We also thank Stanley Henshaw,
Kosali Simon, Adam Sonfield, and Christopher Rogers for their assistance
in obtaining some of the data used in our analysis. Rebecca Vichniac and
Daniel Theisen provided outstanding research assistance. We also grate-
fully acknowledge funding from NICHD (grant number R03 HD052528).
Any views expressed are those of the authors alone.
The Review of Economics and Statistics, February 2009, 91(1): 137–151
©
2009 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
They conclude that the types of programs “evaluated to date
do not delay the initiation of sexual intercourse, improve use
of birth control among young men and women, or reduce
the number of pregnancies in young women.” Paton (2002)
uses difference-in-difference methods to examine the im-
pact of a policy implemented in the United Kingdom in
which parental consent was required before family planning
services could be provided to those under the age of 16. He
finds no evidence that this restriction on family planning
access had any impact on pregnancies or abortions.
There also have been previous studies examining the
relationship between geographic measures of contraceptive
access and sexual outcomes (cf. Lundberg & Plotnick,
1990; Mellor, 1998; and Averett, Rees, & Argys, 2002). In
general, these studies differ from ours in emphasis and
scope and, furthermore, the sources of identifying variation
are arguably not independent of the demand for contracep-
tion.
The Medicaid expansion policy that we evaluate differs
from previously reviewed “pregnancy prevention” pro-
grams in that it was not limited to teenagers. It was broad-
based, affecting women in multiple states and varied lo-
cales, as opposed to a single community initiative aimed at
reducing pregnancy among a very specific teen population.
Furthermore, the policy change is specifically about ex-
panded access to family planning services, as opposed to a
range of services including educational or job training.
Finally, the waivers were directed at women who were not
at the very bottom of the income distribution. On the one
hand, such women may be more responsive to such inter-
ventions. On the other hand, they may be more likely to
have been using contraception previously, paid for either
through a private health insurance employer or out of
pocket. Therefore, past evidence does not adequately inform
the issue of the effectiveness of the Medicaid family plan-
ning expansions.
Going back further in time provides an example of
expanded contraceptive access that has had a significant
impact on women’s fertility. Recent evidence has examined
the introduction of the birth control pill in 1960 and the laws
that regulated teens’ access to it through the 1960s and
1970s. Bailey (2006) reports that as states relaxed restric-
tions on teens’ ability to obtain the pill, the likelihood of
experiencing a first birth by age 22 fell by 16%. Although
this intervention is considerably different from that which
we explore, it does suggest that it is possible for greater
contraceptive access to reduce fertility.
To date, two studies of which we are aware have explored
the impact of Medicaid family planning waivers directly.
Edwards, Bronstein, and Adams (2003, which was reported
in Gold, 2004) examine the impact of family planning
waivers granted to six states, but the study has serious
methodological weaknesses. In particular, the authors esti-
mate the number of births averted based upon the deviation
from prewaiver birth levels within each state; no control
group is used to provide an idea of what would have
happened to birth rates in the state had no waiver been
granted. Lindrooth and McCollough (2007) address this
problem, introducing a differences-in-differences frame-
work. They find income-based waivers reduced fertility by
about 2 percentage points. Our work also uses a differences-
in-differences strategy, but makes important additional con-
tributions relative to their work, adding specification
checks, an examination of potential mechanisms, third dif-
ferences, and the like, in further assessing the causal nature
of the results.
B. Institutional Details
Historically, the main source of public support for family
planning services in the United States has been Title X of
the Public Health Service Act (commonly referred to as
Title X), introduced in 1970. This program is still an
important source of public funds for family planning ser-
vices, but its budget has shrunk considerably in real terms
over the past couple of decades. The Medicaid system has
also provided access to family planning services to its
clients since 1972, but the stringent eligibility requirements
to receive Medicaid meant that historically only the very
low-income and only women with children had access to
these services. A series of expansions in the 1980s extended
eligibility for pregnancy-related care, including family plan-
ning services for sixty days postpartum. In addition, ado-
lescents have had access to family planning services
through the State Children’s Health Insurance Program
(SCHIP), which was implemented in the late 1990s. Despite
the coverage of family planning provided by SCHIP, Gold
and Sonfield (2001) report that the take-up rate of this
provision among adolescents is quite low, in part because of
the lack of confidentiality in their provision.
Between 1994 and 2001, federal Medicaid spending on
family planning more than doubled, increasing from $332
million to $770 million. It rose from 46% of total federal
spending on family planning to 61%. During this time the
federal government allowed states to implement programs
that offer family planning services to women whose in-
comes would have been too high under the existing Med-
icaid program or to women who otherwise would have lost
Medicaid eligibility, typically postpartum. These waivers
allow states to offer the full range of family planning
services it offers to its regular Medicaid recipients to addi-
tional women. Family planning services provided include a
full range of contraceptive methods as well as associated
examinations and laboratory tests. The federal government
reimburses the state Medicaid program for 90% of these
services and supplies. States may include other related care
in their package of benefits, including treatment for STDs,
but these services are reimbursed by the federal government
at the regular rate, which ranges from 50% to 76% of cost
(Frost, Sonfield, & Gold, 2006). Seventeen states cover
abortion under their Medicaid program, but federal funds
THE REVIEW OF ECONOMICS AND STATISTICS138
may not be used for abortion and hence abortion services
are not provided under these waiver provisions.
Beginning with South Carolina in 1993 and most recently
with Texas at the end of 2006, 25 states have applied for and
received waivers to extend eligibility for these family plan-
ning services to women who would not otherwise be cov-
ered. Table 1 lists the provisions enacted in each state along
with the dates they were approved and implemented. Eight
states currently have waiver policies in place to extend
coverage to women who would otherwise lose the sixty-day
postpartum coverage of family planning services. Two other
states extend coverage of family planning services for up to
two years and five years for women who would lose Med-
icaid eligibility for any reason, not just postpartum. For the
remainder of this analysis, we will collectively refer to these
two types as duration waivers. An additional seventeen
states have been granted waivers to extend Medicaid family
planning services based solely on income, regardless of
categorical eligibility requirements (such as having a depen-
dent child); this income threshold is set to 133% of the
federal poverty line in one state, 185% of the federal
poverty line in eight states, and to 200% of the poverty line
in the remaining seven states. We refer to these seventeen
policies as income-based waivers. Both South Carolina’s
and New York’s waivers extend coverage to both women
losing eligibility postpartum as well as women under the
income threshold.
III. The Impact of Waivers on the Number of Public
Family Planning Recipients
Before examining the impact of waivers on fertility
outcomes, we undertake an analysis to determine whether
the policy change increased the number of women who
received Medicaid family planning services. If more people
are not going through the front door of the Medicaid-funded
family planning provider, then it is unlikely that the pro-
gram had any behavioral effects.
Although this is a useful first step in our analysis, it is
important to consider two important limitations in interpret-
ing its results: crowdout and spillover. Crowdout refers to
the possibility that some women who receive family plan-
ning services through the Medicaid program after the
waiver would have used privately provided family planning
services in the absence of a waiver. This merely changes the
form of payment, not the services provided, and should have
no behavioral impact. Spillover refers to the possibility that
the introduction of a waiver increases program awareness
and increases visibility of family planning clinics, which
increases the take-up of services among women who were
previously eligible for Medicaid family planning services
but not receiving them. In this instance we might see an
increase in contraceptive use and a corresponding fertility
response that is greater than that due to newly eligible
women alone. Identifying the impact of the policy on
TABLE 1.—STATES WITH SECTION 1115 MEDICAID FAMILY PLANNING WAIVERS
State Date Approved Date Implemented
Basis for Eligibility
Losing Coverage
Postpartum
Losing Coverage
for Any Reason
Based Solely on
Income (FPL)
Alabama 7/1/2000 10/1/2000 133% of poverty
Arizona 4/1/1995 8/1/1995 2 years
Arkansas 6/18/1996 9/1/1997 200%
California 1/1/1997 1/1/1997 200%
Delaware 5/17/1995 1/1/1996 2 years
Florida 8/23/1998 9/1/1998 2 years
Illinois 6/23/2003 4/1/2004 5 years
Iowa 1/10/2006 2/1/2006 200%
Louisiana 6/6/2006 7/1/2006 200%
Maryland 12/5/1994 2/1/1995 5 years
Michigan 3/1/2006 7/1/2006 185%
Minnesota 7/20/2004 7/1/2006 200%
Mississippi 1/31/2003 10/1/2003 185%
Missouri 4/29/1998 2/1/1999 1 year
New Mexico 8/1/1997 7/1/1998 185%
New York 9/27/2002 10/1/2002 200%
New York 9/27/2002 10/1/2002 2 years
North Carolina 11/5/2004 11/5/2005 185%
Oklahoma 11/5/2004 4/1/2005 185%
Oregon 10/14/1998 1/1/1999 185%
Rhode Island 11/1/1993 8/1/1994 2 years
South Carolina 1/1997 7/1/1997 185%
South Carolina 12/1993 7/1/1994 2 years
Texas 12/21/2006 1/1/2007 185%
Virginia 7/22/2002 10/1/2002 2 years
Washington 3/6/2001 7/1/2001 200%
Wisconsin 6/14/2002 1/1/2003 185%
Notes: Waivers in Alabama, Illinois, Louisiana, Michigan, New Mexico, North Carolina, and Oklahoma are restricted to individuals age 19 and older. The dates for California correspond to policies funded by
the state; federal financing of these waiver policies commenced two years later.
Sources: Frost et al. (2006), http://www.guttmacher.org/statecenter/spibs/spib_MFPW.pdf (accessed 9/28/05), http://www.cms.hhs.gov/medicaid/waivers/waivermap.asp (accessed 9/28/05), and Guttmacher
Institute (2006), http://www.guttmacher.org/statecenter/spibs/spib_SMFPE.pdf (accessed 9/2/06).
SUBSIDIZED CONTRACEPTION, FERTILITY, AND SEXUAL BEHAVIOR 139
overall contraceptive use in light of both crowdout and
spillover issues would require data on all women’s use of
family planning services; unfortunately no such data are
available.
Instead we make use of publicly available data from the
Medicaid Statistical Information System (MSIS) of the
Centers for Medicare and Medicaid Services (CMS), the
basic source of state-submitted eligibility and claims data on
the Medicaid population. State-by-state tables are available
for fiscal years 1999 to 2002 that contain information on the
number of Medicaid beneficiaries with family planning
claims. We obtained comparable data for the years 1992 and
1998 from the older national HFCA-2082 tables.
1
Finding
an effect on service receipt from these data is a necessary,
but not sufficient, condition in identifying any behavioral
effects that may have resulted from the introduction of the
waivers.
We use these data to estimate a simple ordinary least
squares regression of the proportion of women 15–44 re-
ceiving Medicaid family planning services on indicator
variables for the implementation of income-based and
duration-based waivers along with state and year fixed
effects. In its simplest form, this approach is equivalent to a
difference-in-difference estimator. We also add to these
regressions a full set of control variables (described in more
detail subsequently), holding constant other state-level pol-
icy changes and changes in demographic characteristics of
state populations over time. Finally, we experiment with
alternative forms of trends within states over time, including
no state-specific trends as well as linear and quadratic
state-specific trends.
Table 2 reports the results of this analysis. Column 1
provides the 1992 (prior to any waiver) values of the
proportion of women 15–44 receiving Medicaid family
planning services in states that implemented income and
duration waivers by 2002 (the last year of data availability).
The results indicate that 4.6% and 3.7% of women were
receiving those services in the two respective types of states.
These estimates provide a reference point to help interpret
the magnitude of the results from this regression analysis.
The regression estimates reported in the remainder of the
table provide clear evidence that income-based waivers
increased the number of women receiving family planning
services through the Medicaid program. Columns 2–4
present these results, where each column represents the
results from a separate regression. The coefficient estimates
from all three specifications indicate that the number of
recipients increased tremendously, on the order of two to
three times depending upon specification, in response to an
income-based waiver. Later in the paper we describe a
procedure for estimating the percentage of the female pop-
ulation ages 20–44 that would be newly eligible for Med-
icaid family planning services under these waivers and
obtain an average figure across states of 22.5%. Combining
the results here ofa5to10percentage point increase in the
share of the population receiving Medicaid family planning
services, this implies an average take-up rate in the vicinity
of 22% to 44% among those whose eligibility was affected
by the policy.
Once state trends are added, duration-based waivers
also are estimated to have a modest impact on benefit
receipt, but these estimates are not statistically signifi-
cant. Given the size of the estimates, we interpret these
results as ruling out large effects, but not ruling out some-
thing less than that.
We conclude from this analysis that we have at least
established a basis to further examine the impact of these
policy changes, and particularly income-based waivers, on
behavioral outcomes. The potential for crowdout of pri-
vately funded contraceptive use means that the increase in
the number of Medicaid family planning recipients need not
have led to any change in contraceptive behavior or fertility
outcomes. This is an empirical question that we address
subsequently.
1
We are grateful to Kosali Simon for sharing these data with us. These
aggregated statistics are not available separately for teens. A visual
inspection of these data indicated a handful of data points that clearly
represent errors. States with a steady-state positive value of recipients
suddenly equal 0 or very near 0 and then revert to values comparable to
the earlier values. We chose to recode as missing all states where the
proportion of women 15–44 receiving Medicaid family planning services
fell below 0.05%. We also tested the sensitivity to the precise cutoff used,
but found that it had negligible effects on the results. In total, we recoded
23 observations to missing.
TABLE 2.—IMPACT OF WAIVERS ON THE NUMBER OF MEDICAID FAMILY PLANNING CLIENTS AS A PROPORTION OF THE FEMALE POPULATION AGE 15–44
Mean Proportion Medicaid
FP Clients in 1992
(1)
No State Trends
(2)
Linear State Trends
(3)
Quadratic State Trends
(4)
Income-based waiver 0.046 0.116 0.088 0.053
(0.027) (0.024) (0.013)
Duration-based waiver 0.037 ⫺0.006 0.013 0.012
(0.007) (0.011) (0.008)
Neither 0.044 — — —
Number of observations — 538 538 538
Notes: Columns 2 to 4 report results from separate regressions where the dependent variable is the proportion of the female population age 15–44 who received Medicaid family planning services. All regressions
control for state and year fixed effects, the state unemployment rate, the maximum welfare benefit for a family of three in the state-year, and whether the following policies were in place in the respondent’s state
at the beginning of the survey year—welfare family cap, TANF, SCHIP, Medicaid coverage of abortion, abortion parental notification requirements, abortion delay rules, and mandated private health insurance
coverage of family planning services. They also control for the percentage of the state-year female population in the following demographic groups: married, white, Hispanic, four education groups, and age 15–17,
18–19, 20–24, 25–29, 30–34, and 35–39. All regressions are weighted by the population of women age 15 to 44 in the state and year. Standard errors are adjusted for clustering at the state level. Data on Medicaid
family planning beneficiaries for the years 1999–2002 are from the Medicaid Statistical Information System (MSIS), downloaded from http://www.cms.hhs.gov in December 2006. Comparable data for 1992–1998
come from national HFCA-2082 tables, graciously provided to us by Kosali Simon.
THE REVIEW OF ECONOMICS AND STATISTICS140
IV. Estimating the Impact on Births and Abortions
A. Econometric Methodology
To investigate the impact of expanded eligibility for
Medicaid family planning services on births and abortions,
we use difference-in-difference methods exploiting the vari-
ation across states in the timing of program implementation,
as detailed in table 1. Specifically, we begin our analysis by
estimating ordinary least squares regression models of the
following form:
lnY
st
⫽ 
0
⫹ 
1
共inc. waiver兲
st
⫹ 
2
共dur. waiver兲
st
(1)
⫹ 
3
X
st
⫹ ␥
s
⫹ ␥
t
⫹ ε
st
.
In this model, Y
st
is defined alternatively as the birth or
abortion rate in state s at time t. The regressors of interest,
inc. waiver
st
and dur. waiver
st
, equal 1 if an income-based or
duration-based Medicaid family planning waiver is imple-
mented in state s at time t and equal 0 otherwise. In the year
in which the waiver was passed the regressors are equal to
a fraction between (0,1) based on the number of months the
waiver was in effect. We modify this specification to include
state-specific linear and quadratic time trends to control for
the possibility of a spurious correlation between the intro-
duction of waivers and trends in fertility outcomes across
states. All reported regressions are weighted by the state
population for the relevant population subgroup, but results
are qualitatively similar in unweighted models. Standard
errors are clustered at the state level.
It is also important that these regressions control for other
observable state-specific factors that might have changed
over time, including other relevant policy changes. During
the period we focus on, these include important changes to
abortion restrictions (parental notification/consent, waiting
periods, and Medicaid funding of abortion), the welfare
system (maximum AFDC/TANF benefit for a family of
three, a welfare reform indicator, and a “family cap” indi-
cator), and other Medicaid policies (an indicator for SCHIP
implementation).
2
In addition, a number of states introduced
mandates requiring health insurance coverage of contracep-
tion. We include indicator variables representing whether
these policies were in place in each state/year.
3
In addition,
we include the state unemployment rate to control for
differences in local labor market conditions that may affect
women’s decisions/opportunity cost regarding having chil-
dren. Finally, these regressions include a set of the average
demographic characteristics, including the age and race
composition, educational attainment, and marital status of
women in the state/year. These variables were created using
data from the outgoing rotation group files from the Current
Population Survey, available from the National Bureau of
Economic Research.
We estimate this equation separately for teens and for
non-teens as well as for population subgroups distinguished
by age, race/ethnicity, and educational attainment. Our set
of “treatment states” is composed of the states that imple-
mented income-based waivers (Alabama, Arkansas, Califor-
nia, New Mexico, Oregon, South Carolina, and Washington)
and duration-based waivers (Arizona, Delaware, Florida,
Maryland, Missouri, Rhode Island, and South Carolina)
during our sample period. New York and Virginia imple-
mented waivers in the last quarter of the final year in the
sample period and are not considered treatment states for
the purpose of this discussion or in the figures, but in the
regressions the relevant waiver indicator associated with the
state observation is set equal to 0.25 in the final year. For
models including only teens, we drop observations from
Alabama and New Mexico because the waiver policies in
these states explicitly excluded females under the age of 19.
One important consideration in analyses like this is the
potential for policy endogeneity (Besley & Case, 2000). In
this case, one might expect that states having greater trouble
with unwanted pregnancies may be more likely to adopt
more aggressive family planning policies. The bias in such
an environment, however, would go in the direction of
finding a positive relationship between, say, teen childbear-
ing and family planning, not a negative one, as we are
finding. Moreover, we undertake various analyses to con-
firm that we are finding a causal relationship between the
policy and subsequent fertility. We compare the estimated
impact on birth rates across demographic groups differen-
tially affected within a state by the policy (across education
and age groups, for example). In our analysis of individual-
level data from the NSFG on sexual and contraceptive
behavior we introduce an explicit within-state comparison
by considering separately the impact on women predicted to
have been made newly eligible for family planning services.
The results of these analyses bolster the contention that
policy endogeneity is not driving our results.
B. Data
We use several sources of data to estimate these models,
where the different data sources are necessary to capture
different components of fertility-related behavior. For
births, we use Vital Statistics natality data aggregated to the
state level. These birth data are very well measured in the
aggregate as well as for several population subgroups,
including by state of residence, age, race/ethnicity, and
2
See Levine (2004) for a description of abortion law changes. Informa
-
tion on welfare reform policies were obtained from three sources: (i) a
technical report of the Council of Economic Advisers (1999); (ii) an Urban
Institute report written by Gallagher et al. (1998); and (iii) a report by
Crouse (1999), prepared for the U.S. Department of Health and Human
Services, which summarizes information contained in a report of the U.S.
Department of Health and Human Services (1997). SCHIP implementa-
tion dates were obtained from the CMS Web site (http://www.cms.hhs.
gov/schip/enrollment/fy2000.pdf), accessed September 2005. Data on
welfare benefit levels were obtained from Council of Economic Advisers
(1997) and Rowe, McManus, and Roberts (2004), Rowe and Russell
(2004), and Rowe and Versteeg (2005).
3
We are grateful to Adam Sonfield at the Guttmacher Institute for
providing us with data on these policies.
SUBSIDIZED CONTRACEPTION, FERTILITY, AND SEXUAL BEHAVIOR 141
