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TITLE: Health Care Expenditures, Financial Stability, and Participation in the Supplemental
Nutrition Assistance Program (SNAP)
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INVESTIGATOR(S): Jinhee Kim, Yunhee Chang & Swarn Chatterjee
 BACKGROUND AND METHODOLOGY:
Findings from extant literature suggest that financial instability of households is a
determining factor in their Supplemental Nutrition Assistance Program (SNAP) participation.
Households that experience poverty and financial strain are more likely to participate in SNAP.
Among household-level predictors that impact household income streams, unemployment,
employment changes, and job instability have been associated with SNAP participation. While
the association between household income loss and SNAP participation has been widely studied,
the impact of unexpected major expenses such as medical bills has rarely been studied in
relationship to SNAP participation. Increasing health care expenditures has become a major
cause of households’ financial instability. Household assets help alleviate the negative effects of
financial stress. Additionally, liquidity constraint often diminishes the financial well-being of
households. However, out-of-pocket medical expenses arising out of health shocks can lead to
financial strain among households that have inadequate reserves of emergency funds.
Therefore, the liquidity constraints of households brought about by a sudden financial
shock, such as an increase in medical costs, could affect SNAP participation. In the literature,
financial instability has been predominantly measured with employment and income changes,
while household assets and liquidity constraints have rarely been studied in understanding SNAP
participation decisions of households. Increased out-of-pocket medical expenditures as well as
inadequate reserves of buffer savings could increase financial strains among households. The
purpose of this research was to examine the inter-temporal effects of health care burdens on
SNAP participation behavior of households, especially among those under liquidity constraints.
In the present study, three research questions were identified to examine (1) how a
household’s out-of-pocket medical expenditure is associated with its likelihood of participating
in the SNAP, (2) whether a household’s liquidity constraint is associated with its likelihood of
participating in the SNAP, and (3) whether the absence of liquidity constraint affects the
association between out-of-pocket medical expenditure and SNAP participation. The sample was
drawn from the 2003, 2005, 2007, 2009, and 2011 waves of the Panel Study of Income
Dynamics (PSID), which covers the period of recent financial crisis and recession. In this study,
income and income drop, current and past health conditions, insurance coverage, demographic
characteristics, and state and year effects were controlled.
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FINDINGS: The results indicate that SNAP participation during the 2003-2011 periods has
ranged between 16.5-16.8%, and SNAP participation was the highest in the 2009 wave.
Approximately 75% of the respondents were employed and the average household income for
the population ranged from $67,854 in 2003 to $62,674 in 2011. Household income, which was
adjusted in 2003 dollars showed a declining trend over the five waves of this data. During this
period, 45% of the respondents held adequate liquid assets. Approximately 36% of the
respondents were renters, and 75% owned a car. Eighty-nine percent of the respondents were
covered by either private or public health insurance in 2003, however, participation rate in health
insurance declined to 72% in 2011. Interestingly, out-of-pocket medical cost (adjusted in 2003
dollars) was $9,069 in 2003, but steeply increased to a peak of $13,926 in 2009 and was $12,832
in 2011.
The present study reveals that the health care burden of households might contribute to
the SNAP participation behavior of households. Increase in health care costs was positively
associated with SNAP participation for the entire sample, for the Southern States, as well as for
the low-income household groups (<185% FPL). Additionally, out-of-pocket health care
spending of SNAP participants was not significantly different from that of non-participants,
while the household income of the non-SNAP participants was found to be three times higher
than that of SNAP participants. These results suggest a high burden of medical expenditure on
low-to-moderate income households.
Financial assets and savings might be used to smooth consumption and reduce SNAP
participation. Not surprisingly therefore, liquidity constrained households were more likely to
participate in the SNAP. More importantly, the findings of this study support the importance of
savings for low-income groups.
Interaction between household financial stability and health care burden was significant in
determining SNAP participation, suggesting financial assets could be used to alleviate the health
care burden, and could reduce SNAP participation. Additionally, having inadequate reserves of
emergency funds to deal with health shocks could lead to program dependency.
Future research is needed to examine the effects of Affordable Care Act (ACA) on health
care burdens of household finances and SNAP participation. With the ACA, more households
will have access to health insurance and have help paying medical costs that often distress their
personal finances.
The current study has implications for policymakers. Reducing the health care burden of
households may not only improve health outcomes but may also result in a decrease in SNAP
caseload. Further, health care burdens with or without insurance can be financially draining,
especially for households with chronic health conditions. With regards to calculating SNAP
eligibility and benefits, medical care costs are deductible expenses only for households with
members who are elderly or have disabilities. Such expenses can be considered relevant for
households that contain members who require continuous or unexpected health care spending.
More importantly, the findings support the importance of savings for households including
low-income groups. Low-income households need to be encouraged to build buffer savings.
Asset limits for SNAP benefits also need to be revisited. While many states increased the limit or
eliminated them through a broad-based categorical eligibility, asset limits often pose a barrier to
building savings, and financial security for low-income families. The current federal limit does
not assure adequate buffers for families to deal with financial emergencies such as health care
expenses or car problems. Lack of such buffer savings could lead to financial challenges for lowto-moderate income families, resulting in increases in SNAP participation.
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CONTACT INFORMATION:
Name of principal investigator: Jinhee Kim
Affiliation: University of Maryland
Address: 1142 School of Public Health
University of Maryland College Park, MD 20854
Phone: 301-405-3500
E-mail: jinkim@umd.edu