Medicaid crowd out: hype or reality?

With Medicaid expansion underway, questions about whether Medicaid coverage “crowds out” private coverage have reemerged.

Critics of Medicaid expansion contend that public health insurance causes individuals to forego private coverage. A recent study published in Inquiry sought to quantify this phenomenon—specifically, to determine how many new Medicaid enrollees had private insurance at the time of Medicaid enrollment and, of those new Medicaid recipients, how many dropped their private coverage.

Source: Allen Skyy (Flickr/cc)

Using administrative data from the state of Wisconsin, the study found that between 16-29% of Medicaid enrollees had private insurance coverage at the time of enrollment. Of those enrollees, between 4-19% dropped private insurance coverage once enrolled in Medicaid.

Compared to prior studies, these results suggest that private insurance “crowd out” with broader Medicaid eligibility may not be as prevalent as previously thought. These findings also suggest that many Americans are opting for “dual coverage” (carrying both private insurance and Medicaid coverage).

The private insurance market has evolved over the last decade to include higher cost-sharing, which may provide one explanation for the decision by more consumers to maintain dual coverage.

Americans may opt for dual coverage to mitigate financial risk due to exorbitant cost-sharing requirements under private plans. This would not be surprising given growing evidence that even the privately insured face high financial burdens and more than 75% of medical bankruptcies are filed by insured individuals. This study did not assess the scope or features of private insurance coverage, though under-insurance has been well-described in existing literature.

One additional possible rationale for continued dual coverage could be provider access as low reimbursement rates have increasingly driven doctors to limit their participation in Medicaid. The ACA included temporary Medicaid rate increases (to Medicare levels) for some primary care services but, unless these enhanced reimbursement rates are sustained, provider participation may continue to compromise Medicaid recipients’ access to care.

commentary by Elizabeth Wiley, MD, JD, MPH

Abstract

We use administrative data from Wisconsin to determine the fraction of new Medicaid enrollees who have private health insurance at the time of enrollment in the program. Through the linkage of several administrative data sources not previously used for research, we are able to observe coverage status directly for a large fraction of enrollees and indirectly for the remainder. We provide strict bounds for the percentages in each status and find that the percentage of new enrollees with private insurance coverage at the time of enrollment lies between 16 percent and 29 percent, and the percentage that dropped private coverage in favor of public insurance lies between 4 percent and 18 percent. Our point estimates indicate that, among all new enrollees, 21 percent had private health insurance at the time of enrollment and that 10 percent dropped this coverage. Our results show substantially lower rates than previous studies of crowd-out following public health insurance expansions and significant rates of dual coverage, whereby new enrollees into public insurance retain their previously held private insurance coverage. PMID: 25316718

Dague, Laura et al. Inquiry. 2014; 51.