Study: Two-Thirds of Medicaid Expansion Enrollees Were Already Eligible

Published January 10, 2017

Most enrollees in state Medicaid expansion programs under the Affordable Care Act (ACA) were eligible for the government-sponsored health insurance program before the law went into effect, with federal taxpayers consequently paying a higher share of states’ Medicaid bills than they should, according to a study by one of ACA’s architects.

Approximately 63 percent of individuals who gained insurance under ACA in 2014 obtained coverage through Medicaid, states a New England Journal of Medicine article coauthored by Jonathan Gruber in October 2016.

Only about one-third of that 63 percent (19 percent of all people newly insured under ACA) were made newly eligible for financial assistance by their state’s Medicaid expansion program. The remaining two-thirds of new Medicaid enrollees were “children and adults who were already eligible for the program before 2014. This population accounted for 44 percent of the coverage increase,” the article states.

Affirms Obamacare Repeal Feasibility

Dr. Joel Zinsberg, a visiting scholar in health care policy at the American Enterprise Institute, says the study refutes claims repealing ACA would deprive most Americans of health insurance.

“Much of the media and ACA proponents are ignoring the Gruber study,” Zinsberg said. “They are acting as if every single one of the 20 or so million who gained insurance will lose it with ACA repeal. That is simply untrue.”

In addition to the 44 percent of previously eligible newly insured Medicaid enrollees, many newly insured individuals will retain coverage if Congress repeals most of ACA, Zinsberg says.

“If Trump keeps the signup of kids up to age 26 on their parents’ insurance, that’s another 12 percent or so,” Zinsberg said. “After that, it depends on what is kept and how a replacement is implemented. If, as Trump has promised, guaranteed issue is retained and is coupled with new programs like refundable tax credits and [health savings accounts] to replace exchange subsidies, I think many of the newly insured in the individual and small group market will be able to remain insured.”

Cooking the Books

Under the ACA, the federal government pays states with Medicaid expansion programs an enhanced federal medical assistance percentage (FMAP), paying 100 percent of Medicaid expansion costs for newly eligible enrollees through 2016 and gradually reducing the federal share to 90 percent by 2021.

Under the law, the federal government is supposed to pay states the lesser, traditional FMAP rate for new enrollees who were eligible for Medicaid before their state expanded the program.

Brian Blase, a senior research fellow at the Mercatus Center at George Mason University, says the lure of enhanced FMAP spending gives states an incentive to inflate their count of newly eligible Medicaid enrollees.

“States—as well as insurers, since states appear to be paying them much more for newly eligible enrollees—have a large incentive for people to be classified as newly eligible,” Blase said. “One hundred percent of their spending on the newly eligible population has been reimbursed, relative to about a 58 percent reimbursement rate for traditional Medicaid enrollees.”

Double Trouble

The federal government is paying states more than twice as much as it should under the law for two-thirds of new Medicaid enrollees, Blase says.

“For each person who is classified as a newly eligible enrollee, the federal government paid an average of $6,399 in 2015,” Blase said. “For each person classified as a previously eligible non-disabled adult enrollee, the federal government probably paid about $3,000. So, for people incorrectly classified, the federal government is paying about $3,000 too much.”

Calls for Block Grants

Devolving control of Medicaid expenditures to the states, instead of concentrating control in Washington, DC, would spur innovation and reduce health care costs, Zinsberg says.

“Medicaid budgets were a tremendous burden before the ACA and became an even bigger burden after the ACA,” Zinsberg said. “Giving the states block grants of money and letting them experiment with different ways to deliver effective health insurance more cheaply would be a good way to start.”

Block grants would encourage states to tailor their Medicaid programs to serve their specific populations more efficiently, Zinsberg says.

“The optimal solution will likely differ in different states because of varying populations and conditions, but it is clear that one size does not fit all,” Zinsberg said. “Let’s try the laboratory of the states.”

Ben Johnson ([email protected]) writes from Stockport, Ohio.

Internet Info:

Molly Frean, Jonathan Gruber, and Benjamin D. Sommers, “Disentangling the ACA’s Coverage Effects—Lessons for Policymakers,” New England Journal of Medicine, October 27, 2016.