Newly Eligible Cost 21% Less to Cover

“We can’t afford it” is a common objection to expanding access to health care in the United States. The obvious rebuttal proclaims that we can’t afford not to expand given the costs associated with being uninsured. Either way, policy makers need to have good information regarding how much expanding healthcare coverage would cost as they contemplate healthcare reform. To date, the best national estimate of the cost of newly eligible and enrolled adults in Medicaid suggests that they cost 17 percent more than those previously eligible. However, that figure was largely generated from prospective payments to managed care organizations, instead of actual costs incurred. This study seeks to shed further light on the costs involved in covering newly eligible Medicaid enrollees using data from the Medical Expenditure Panel Survey (MEPS).

The marquee finding was that newly eligible enrollees cost 21 percent less per month than those previously eligible ($180 vs. $228 per month in absolute terms). The study suggested decreased utilization by newly eligible enrollees, such as newly enrolled parents having 1.89 office visits annually compared to 4.03 for those previously enrolled. The study also investigated the theory of pent-up demand – that  higher initial spending on newly eligible enrollees would later give way to a lower baseline. A trend suggestive of higher initial costs was evident but did not attain statistical significance.

While fascinating, the impact of these estimates is limited by the MEPS’s relative exclusion of difficult-to-reach populations such as the homeless and newly released prisoners. As these groups may be particularly expensive to cover, the overall cost estimate might have been artificially lowered. However, the cost estimate should still be valid when looking at marginal changes to eligibility requirements, like tweaking the income cutoff, as such shifts are unlikely to greatly impact those difficult-to-reach groups.

Why newly eligible enrollees spent less is an intriguing question not addressed by this study. Various theories abound, including newly eligible enrollees being healthier. Alternatively, these individuals may have a more difficult time accessing healthcare resources than the previously eligible population. Understanding what drives this pattern of utilization represents another key piece of the puzzle for policymakers contemplating Medicaid expansion.

commentary by Matthew Stampfl

Abstract

Understanding the health care spending and utilization of various types of Medicaid enrollees is important for assessing the budgetary implications of both expansion and contraction in Medicaid enrollment. Despite the intense debate surrounding the Affordable Care Act (ACA), however, little information is available on the spending and utilization patterns of the nonelderly adult enrollees who became newly eligible for Medicaid under the ACA. Using data for 2012-14 from the Medical Expenditure Panel Survey, we compared health care spending and utilization of newly eligible Medicaid enrollees with those of nondisabled adults who were previously eligible and enrolled. We found that average monthly expenditures for newly eligible enrollees were $180-21 percent less than the $228 average for previously eligible enrollees. Utilization differences between these groups likely contributed to this differential.

PMID: 28874492

Jacobs, PD, et al. Health Affairs. 2017; 36 (9): 1637-42.