With New Marketplaces Created by the Affordable Care Act, Is It Still Less Expensive to Serve Low-Income People in Medicaid Than in Private Insurance?

Brief

With New Marketplaces Created by the Affordable Care Act, Is It Still Less Expensive to Serve Low-Income People in Medicaid Than in Private Insurance?

Abstract

This study aims to assess the cost of Medicaid relative to private insurance in the health insurance landscape under the Affordable Care Act (ACA). Using 2014–16 data from the Medical Expenditure Panel Survey Household Component, we assess differences in the per capita cost of care, and the components of cost, for nonelderly adults (1) who purchase Marketplace coverage versus those who enroll in Medicaid, (2) with private Marketplace coverage versus those with private group (i.e., employer-based) insurance, and (3) enrolled in Medicaid versus those with group insurance. To evaluate whether differences in health expenditures between Medicaid and Marketplace enrollees are driven by differences in utilization, price, or both, we estimate regression-adjusted models that control for socioeconomic characteristics and health status. We find that people obtaining insurance through the ACA Marketplaces receive significantly less care in hospital emergency rooms and inpatient settings than Medicaid enrollees. However, they have higher total spending for physician and hospital outpatient visits and emergency room services than Medicaid enrollees, because of their higher expenditures per visit. Though we cannot definitively conclude that total health care expenditures for Medicaid enrollees were lower than those for Marketplace enrollees during our study period, our findings may help policymakers better understand the total cost of health care. For example, relying more on the ACA Marketplace to expand health insurance coverage could increase total expenditures, given Marketplace enrollees’ higher per capita spending across certain services. However, policymakers also need to account for other factors, such as administrative costs, cost sharing, and network quality, to know whether expanding Medicaid or Marketplace plans is more affordable and desirable.

 

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