New Medicaid Patients Will Be More Expensive Than Current Enrollees

A new study from Avalere Health is predicting that newly-insured Medicaid beneficiaries — who will enroll in the program as a result of the Affordable Care Act — will be sicker and more expensive to treat than current beneficiaries, the Hill’s Sam Baker reports:

A new Avalere analysis found that roughly two-thirds of Medicaid beneficiaries report being in “excellent” or “very good” health — compared with only about half of the low-income uninsured population that will gain access to Medicaid in 2014.

“What it means is that this is a more expensive population to treat, at least initially,” Mendelson said.

He could not say whether the findings indicate that the Medicaid expansion will ultimately cost more than what the Congressional Budget Office projected in its estimates of the healthcare reform law. It’s normal for per-person costs to jump as new groups gain access to healthcare coverage, he said.

This isn’t exactly unexpected, since uninsured individuals often lack access to the preventive care necessary to catch a condition before it becomes chronic and more expensive to treat. If anything, the report highlights the importance of investing in preventive care and expanding access to universal coverage sooner rather than later. The price tag for covering the uninsured would have been far smaller (party because their population was smaller as were health care prices) if lawmakers had expanded coverage under Clinton or Carter or Nixon.

After years of kicking the can down the road, the up-front cost of covering the uninsured is, indeed, impressive. But it’s also a necessary investment that will not only produce a healthier population, but could allow the government to spend less on health care (particularly uncompensated care). Even the short-term deal should be attractive for the states. A recent report from researchers at the Robert Wood Johnson Foundation and the Urban Institute predicts that states will save between $92 billion and $129 billion from 2014 to 2019 “because of provisions in the Affordable Care Act (ACA) that are designed to reduce the uninsured population and provide federal funding for functions that, in the past, have been financed by states and localities.” The federal government will spend “$704 billion to $743 billion more under ACA, while states will spend $92 billion to $129 billion less with ACA than without it.”


The Urban Institute looked at this question and came to a very different conclusion, noting that the cost of new Medicaid enrollees would depend on state outreach efforts:

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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