After the "Woodwork Effect," Will the Newly Enrolled Stay in Medicaid?

November 28, 2016

Awareness of Medicaid eligibility rules meant that in 2014 alone, more than 2 million people enrolled for benefits who belonged in the program but for some reason had never signed up.

Even if the Affordable Care Act (ACA) is repealed, some of its effects may remain, such as one that brought coverage to some of the poorest Americans—including many in the poorest states.

In 2014 alone, up to 2 million Americans who were already eligible for Medicaid, but for some reason had not signed up, obtained coverage during the first full year of the ACA. Experts attribute this to a variety of reasons—including outreach efforts to sign up the poor, coupled with awareness that coverage was now a requirement.

Whatever the reason, this “woodwork effect” brought entire families into Medicaid, including in states that refused expansion. A commentary published a week before this year’s election in the New England Journal of Medicine (NEJM) found that 44% of the population newly enrolled in Medicaid in 2014 was already eligible, and about half were in non-expansion states.

In Florida, for example, ModernHealthcare reported that this effect resulted in a 17.3% increase in Medicaid and CHIP since 2013. The state will seek a renewal of its controversial waiver after President-elect Donald J. Trump takes office. In Alabama, the enrollment surge means that 22% of the state’s population is in Medicaid, but the lack of expansion means that 84% of the state’s hospitals are operating in the red.

As the NEJM essay notes, the ACA streamlined the application process, removed asset tests, and extended eligibility to parents of children who were already eligible in many cases. These changes made it easier for the poor to enroll. The question after Trump takes office is: will they stay there?

The import of this means that far fewer enrollees would get kicked out of Medicaid if expansion were to go away under a repeal of the ACA, a fact that has implications for both the federal budget and for expansion states that may have wrongly been charging HHS for 90% of the cost of these “woodwork” enrollees, according to Brian Blasé of the Mercatus Center, writing in Forbes.

Both Trump and House Speaker Paul Ryan have called for allocating Medicaid block grants to states. While that idea might have a tough time getting through Congress, a more likely tactic would be the executive branch’s use of waivers, which would allow the new administration to work with states on eligibility requirements.

As noted in a commentary Monday in JAMA by Gail R. WIlensky, PhD, Ryan’s plan gives states choices in adopting grant strategies: a pure “block grant” that does not fluctuate with enrollment, or a per capita grant, which allows Medicaid spending to rise and fall with economic fortunes.

What Trump and the Republicans will find, Wilensky and others write, is that repealing the ACA won’t be fast or easy.

“Republicans in both the Senate and the House have made it clear that Republicans are not going to repeal the ACA without having alternative strategies in place that will cover approximately similar numbers of the newly insured population,” WIlensky wrote. “The basic interest of Congressional members in political survival suggests this as well.”