Guaranteed income programs might improve people's lives, but not their health

Money can buy you food, housing and other necessities, but cash handouts don't result in better health.

That’s according to a study published last month by the National Bureau of Economic Research of a guaranteed income program that gave people $1,000 every month over three years to spend as they wished. 

Across the U.S., guaranteed income programs have gained traction as a strategy to alleviate poverty and address income gaps, with more than 150 programs across 35 states announced since 2017, according to the Economic Security Project. The initiatives provide people, typically low-income, with cash payments to use at their discretion, like paying rent, buying groceries or investing in their education. 

The study is based on a three-year guaranteed income program conducted from 2020 to 2023 by the nonprofit research organization OpenResearch. During that time, 3,000 individuals ages 21 to 40 received monthly cash payments with no strings attached. Participants were located in Texas and Illinois and had an average household income of $30,000. They were divided in two groups: an experimental group of 1,000 people who received $1,000 every month and a control group of 2,000 who received $50.

The study found that while recipients in the experimental group spent slightly more on health care than those in the control group, they did not experience significant improvements in physical health, or even in mental health after the first year.

For policymakers, that means guaranteed income programs are not the most effective way to address health disparities between low-income and higher-income people, said Sarah Miller, lead author of the study and an associate professor at the Ross School of Business at the University of Michigan. 

To “get the most bang for your buck,” she said, “start with the policies that are actually about health. Don’t expect a guaranteed income [program] to be the thing to improve health.” 

However, researchers did find that the cash transfers gave people flexibility and allowed them to meet their specific needs and goals, said Elizabeth Rhodes, research director at OpenResearch. 

Also important, she said, is the fact that “the recipient’s circumstances really do change the options that the money creates.” 

Some participants, for instance, were able to work fewer hours because they had more income through the program. They reported using that extra time and money to go back to school, seek higher paying jobs or spend more time with their children, Rhodes said. The lowest-income participants, however, were more likely to use the money to meet basic needs like housing, food and transportation. 

But despite participants reporting high health needs—about 29% of individuals were uninsured and 27% said they skipped needed care due to cost at the start of the experiment—the data shows they didn't spend a significant amount of their monthly payments on health care services. 

However, program participants were slightly more likely to visit an emergency room and, on average, spent $20 more per month on health care and about $13 more on insurance premiums than those in the control group, Miller said.

It's important to note, she said, that participants did not report experiencing better access to care. Study findings show, for instance, “people using more dental care but also reporting that they’re skipping dental care,” which Miller said could be because patients realized they required more extensive, costly services after an initial appointment and decided not to pursue it further. 

Plus, self-reported and clinical data, including blood draws and measurements of blood pressure, cholesterol and other health indicators, from participants showed minimal and short-lived improvements, if any, she said. Participants reported a slight improvement in mental health and stress levels at the start of the program, for instance, but Miller said “we see these stress improvements basically go away after the first year.”  

Rhodes, of OpenResearch, said that could be because for low-income individuals who have experienced chronic poverty and income-related stress, “a short-term infusion of cash … can’t erase years of exposure” to those conditions. 

Policymakers should consider more direct interventions to improve individuals’ health, said Gina Hijjawi, senior program officer at the Robert Wood Johnson Foundation’s research evaluation and learning department. 

Cash transfers can impact overall well-being by allowing people to spend more time with their kids, purchase healthier food options or even spend money on leisure activities like going to the movie theater, she said, but “a safety net is not the final solution.” 

State legislators could instead leverage policies that increase the accessibility and affordability of health care, Hijjawi said. She pointed to Medicaid expansion as an example, which has helped more than 18 million low-income adults access health care as of December 2020. Ten states, including Texas—one of the participating states of OpenResearch’s cash transfer project—have yet to implement it. 

Officials should also invest in their communities to foster better living and health conditions, she said. That means investing in safe drinking water systems and standards, for instance, and addressing food deserts by developing meal assistance programs. 

Miller also pointed to the importance of reducing prescription drug costs to increase individuals’ ability to manage and prevent adverse health conditions. 

Guaranteed income programs may have some health benefits, like allowing more access to health care, which could improve health in the long run, Miller said. But “if you’re a policymaker, and you’re laser-focused on health,” she said, guaranteed income programs are “kind of a blunt instrument.”