Considering Medicaid Expansion for Your State? Read This Study.

National Journal, Clara Ritger, Jan. 6, 2014

States that underwent early expansions of their Medicaid programs reduced their uninsured population, but they also pulled some customers off of private plans and onto government insurance rolls, according to a new study.

In an effort to understand how states fared after adopting Obamacare's Medicaid expansion, a team of researchers from Harvard University and the Urban Institute evaluated official monthly Medicaid enrollment data from Connecticut, the District of Columbia, California, and Minnesota—the first four areas to grant program eligibility to some childless adults.

The researchers then compared the change in uninsured rates in those four states with states that did not change their Medicaid eligibility requirements in order to gauge whether expanding Medicaid increased coverage for vulnerable populations. The findings—published in the January issue of Health Affairs—showed a steady increase in enrollment over time, and a disproportionately sick number of enrollees in the early months.

The Affordable Care Act initially compelled states to make all individuals with incomes up to 138 percent of the federal poverty line eligible for Medicaid, setting a national standard to replace a system that allowed states to set their own requirements. The Supreme Court struck down that provision of the law in July 2012, leaving each state the option of whether to adopt the new standard.

As state governments' choices for Obamacare implementation continue to take effect, however, early program expansions can serve as a road map for what lies ahead. In 2010, Connecticut expanded by between 56 and 68 percent (depending on regional variations) and D.C. allowed individuals earning as high 200 percent of poverty into Medicaid. California followed Connecticut's example in 2011, and Minnesota expanded up to 75 percent of poverty that same year.

For states still weighing whether to expand, the research could confirm fears of an expensive burden on state budgets. But it also could signal gains from expanding early, says researcher Benjamin Sommers, a professor at the Harvard University School of Public Health.

"We do find some evidence that the first enrollees are going to be sicker but that should level out over time," Sommers said. "In some ways that makes the case that states should do the expansion early, when they are getting 100 percent of the program paid for by the federal government."

The federal government is required to pay the full cost of Medicaid expansion for states from 2014 to 2016, with payments reducing to no less than 90 percent thereafter. In some cases, those federal dollars are replacing private money.

In Connecticut, the researchers found, roughly 40 percent of new Medicaid recipients had previously been on private coverage. The phenomenon is known as "crowd-out," and could result in unnecessary public spending if the same trend occurs at the federal level.

But the states also saw a "spillover effect," a term used to describe a spike in sign-ups by individuals who were eligible prior to the expansion.

"There's good evidence already that that is happening in states that did not expand and are seeing increased enrollment in their Medicaid programs," Sommers said.

Despite some transfer of individuals from private insurance or existing state programs, Medicaid expansion overall expanded coverage for the previously uninsured. Connecticut, for example, saw a statistically significant 4.9 percent increase in Medicaid coverage among childless adults with incomes below 56 percent of poverty, accompanied by a 2.8 percent decrease in the uninsured, according to the study.

Sommers said he expects to see what happened in the three states and the District reflected in what happens nationwide as full-scale implementation unfolds.

"These expansions in coverage take time," Sommers said. "Enrollment continued to increase two to three years into the expansion. Those who were quickest were those who had health problems that they couldn't get care for before. I would imagine we would probably see that on a national scale."

It's also why he says it's "way too early" to be drawing conclusions from the enrollment data of the first three months since the exchanges went live.

Sluggish enrollment was a trend in the four states and is magnified at the national level by the glitches that plagued the federal website in its first two months after launch. The Health and Human Services Department has also said it was delayed in its transfer of applications deemed eligible for Medicaid to the states.

In addition, the researchers note that not all states are experiencing political climates that are supportive of the changes to the program, and each state's uninsured population is different.

But the national expansion is buttressed by much greater publicity and outreach, consistent media attention, and the pressure of the individual mandate that requires consumers to get covered or face a penalty, which could mean an easier, faster enrollment process over the first year.

To date, 3.9 million people have been deemed eligible for Medicaid, according to HHS, and 2.1 million signed up for insurance in the individual market roughly halfway into the 2014 open-enrollment period. Updated enrollment totals are expected to be released mid-January.

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