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States' Medicaid Expansion Choices Affected Healthcare Spending Trends in 2014, Report Finds

Mary Caffrey
State-level decisions on whether to expand Medicaid had ripple effects across the rest of the healthcare insurance market, according to a report by the Office of the CMS Actuary in Health Affairs.
Few events have shaped healthcare spending trends like full implementation of the Affordable Care Act (ACA) in 2014. But the Supreme Court of the United States' ruling that gave states the last word on Medicaid expansion meant spending would evolve differently across the country.

Now, a deep examination of long-term data from CMS’ Office of the Actuary, published Wednesday by Health Affairs, shows how a state’s decision to expand Medicaid—or not—affected spending trends in the first year of the ACA.

In 2014, per capita healthcare spending ranged from $5982 in Utah to $11,064 in Alaska. Per capita spending tended to be higher in New England and the Mideast, Great Lakes, and Plains regions, while states with higher levels of uninsured tended to have lower levels of per capital spending.

Overall, per capita growth rates for healthcare spending were similar in Medicaid expansion and nonexpansion states from 2013 to 2014: 4.4% and 4.5%, respectively. The authors found 2 reasons for this:

  • States with expansion had much higher overall healthcare utilization
  • In states without expansion, spending per insured rose quickly, as those who needed healthcare and had previously been denied found their way onto the exchanges


Of course, while spending rates might be similar, effects on state budgets would not be, especially in the early years of the program. The ACA called for federal dollars to cover 100% of expansion costs for the first 3 years, 95% starting in 2017, and 90% starting in 2020. Congress is debating now whether to phase out Medicaid expansion, as it weighs dismantling portions of the ACA.

According to the Health Affairs study, the Medicaid populations differed substantially by state once expansion arrived, and this drove spending. In expansion states, total spending rose 12.3% from 2013 to 2014, compared with 6.2% in states without expansion (other changes that made it easier for the poor to access Medicaid caused enrollment increases in states like Alabama and Mississippi).

However, the authors found that in expansion states, spending per enrollee actually fell by 5.1%, while it increased 5.1% in nonexpansion states. The story here is the population mix—in expansion states, nondisabled adults who had previously been barred from coverage accounted for 43% of the population in expansion states but just 17% in the others. Disabled enrollees, whose care is more costly, accounted for 30% of enrollees in nonexpansion states but only 20% in expansion states in 2014.

Decisions by states to forego expansion affected spending by private insurers, the authors found.

“Aggregate spending grew more rapidly in states that did not expand Medicaid eligibility by 2014 than in states that did, at rates of 6.8% and 4.6%, respectively,” the authors found. This difference is reflected in more rapid private health insurance growth (1.9% in expansion states vs 3.2% nonexpansion).

Marketplace enrollment drove this trend—nonexpansion states accounted for 53.4% of marketplace enrollment, compared with 45.5% of overall private plan enrollment.

Medicare, meanwhile, was least affected by the arrival of the ACA, but was affected by a different trend—the ongoing arrival of baby boomers onto the rolls, which is driving down the average age and spending per enrollee. Spending per enrollee varied from $8238 in Montana to $12,614 in New Jersey.

Reference

Lassman D, Sisko AM, Catlin A, et al. Health spending by state, 1991-2014: measuring per capita spending by payers and programs [published online June 14, 2017]. Health Aff. 2017;  doi:10.1377/hlthaff.2017.0416.

 
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