According to the Congressional Budget Office, the Affordable Care Act will result in 16 million new Medicaid enrollees. A key question is whether the new population covered under Medicaid will be less healthy and thus be relatively expensive, or whether they will be healthier and therefore less expensive than the current Medicaid population. The answer to this question depends largely on the level of Medicaid participation rates under reform. Using the Medical Expenditure Panel Survey (MEPS) to provide a detailed look at the demographic and health characteristics of the population who will be newly eligible for Medicaid, we conclude that on average, this population is likely to be healthier and less costly than those currently enrolled in Medicaid.
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According to the Congressional Budget Office, the Affordable Care Act (ACA) will result in 16 million new Medicaid enrollees. A large number of these new enrollees will be childless adults. A key questions is whether the new population covered under Medicaid will have serious physical and mental health problems and a large number of chronic conditions and thus be relatively expensive, or whether they will be younger and healthier, and therefore less expensive that those currently being served in Medicaid.
In this paper we use the Medical Expenditure Panel Survey (MEPS) to provide a detailed look at the demographic and health characteristics of the population who will be eligible for Medicaid under reform. We find that both currently uninsured and privately insured adults with incomes below 138 percent of the federal poverty level (FPL) are healthier on average relative to both the nondisabled and the disabled adults who are currently enrolled in Medicaid—they are less likely to be in fair or poor general health and in fair or poor mental health, more likely to have two or more chronic conditions, and more likely to be limited in their ability to work. We find that a large number of adults in this income group who are in poor health or who have chronic health problems are already covered by Medicare and/or Medicaid through the Supplemental Security Income (SSI) program or another disability pathway, many being dual eligibles. Results from our microsimulation model indicate that the adults who enroll in Medicaid under reform are likely to be more expensive to cover than those who remain uninsured but still not likely to be as expensive as those currently enrolled in Medicaid.
The answer to whether these new enrollees will be healthier or sicker depends in large part on the level of Medicaid participation rates under reform. Because of adverse selection, it is highly likely that those with more serious health problems will be the first to enroll. Thus, if the program has relatively low participation rates, the risk of adverse selection is higher, making it likely that the enrolled population will be more expensive. If participation rates are extremely high, the new enrollees are likely to look like the underlying population of low-income uninsured and privately insured childless adults and parents.
We conclude that on balance, new Medicaid enrollees, particularly after the initial start-up period, are not likely to be markedly different from the non-disabled currently on Medicaid since the new enrollees will be drawn from a population that is healthier than the adults currently covered by Medicaid. The higher the Medicaid participation rate among the eligible population of adults and the less adverse selection that occurs, the lower the average costs will be under reform, and the broader the mix of new enrollees will be in terms of health status. This does not mean that the new population covered by Medicaid will be uniformly in good health since there are still relatively high percentages in fair or poor health and with two or more chronic conditions within the underlying population. But on average, those newly covered are likely to be healthier and less costly than those who are currently enrolled.
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