Medicaid improves financial risk protection, but still falls short

February 6, 2020

Topics: Quote of the Day

By Hiroshi Gotanda, research scientist, Ashish K Jha, K T Li professor of health policy, Gerald F Kominski, professor of health policy, Yusuke Tsugawa, assistant professor of medicine and health policy
BMJ, February 5, 2020

Abstract

Objective: To examine the association between expansion of the Medicaid program under the Affordable Care Act and changes in healthcare spending among low income adults during the first four years of the policy implementation (2014-17).

Design: Quasi-experimental difference-in-difference analysis to examine out-of-pocket spending and financial burden among low income adults after Medicaid expansions.

Setting: United States.

Participants: A nationally representative sample of individuals aged 19-64 years, with family incomes below 138% of the federal poverty level, from the 2010-17 Medical Expenditure Panel Survey.

Main outcomes and measures: Four annual healthcare spending outcomes: out-of-pocket spending; premium contributions; out-of-pocket plus premium spending; and catastrophic financial burden (defined as out-of-pocket plus premium spending exceeding 40% of post-subsistence income). P values were adjusted for multiple comparisons.

Results: 37 819 adults were included in the study. Healthcare spending did not change in the first two years, but Medicaid expansions were associated with lower out-of-pocket spending (adjusted percentage change −28.0% (95% confidence interval −38.4% to −15.8%); adjusted absolute change −$122 (£93; €110); adjusted P<0.001), lower out-of-pocket plus premium spending (−29.0% (−40.5% to −15.3%); −$442; adjusted P<0.001), and lower probability of experiencing a catastrophic financial burden (adjusted percentage point change −4.7 (−7.9 to −1.4); adjusted P=0.01) in years three to four. No evidence was found to indicate that premium contributions changed after the Medicaid expansions.

Conclusion: Medicaid expansions under the Affordable Care Act were associated with lower out-of-pocket spending and a lower likelihood of catastrophic financial burden for low income adults in the third and fourth years of the act’s implementation. These findings suggest that the act has been successful nationally in improving financial risk protection against medical bills among low income adults.

From the Discussion

Using a nationally representative sample of the low income non-elderly population in the US, we found that the Affordable Care Act Medicaid expansions were associated with lower out-of-pocket spending, lower out-of-pocket plus premium spending, and lower probability of experiencing a catastrophic financial burden at the national level in the third and fourth years of the implementation. We found no significant changes in the first two years of its implementation, and no evidence that premium contributions changed after the implementation of the Affordable Care Act. These findings should be reassuring for policy makers as they suggest that the act successfully achieved one of its primary goals—namely, improving national protection from financial risk against medical bills among low income adults.

Our four years of data indicate that not only were Medicaid expansions associated with a statistically significant improvement in financial risk protection, but also the magnitude of the effect was large and clinically meaningful.

Our estimates indicate that one in seven low income individuals could still have a catastrophic financial burden even in the expansion states after the implementation of Medicaid expansions, and there are several possible reasons for this. First, individuals eligible for Medicaid could have periods without health insurance owing to coverage transitions associated with changes in life circumstances, such as a job and income changes (“churning”). Second, although states generally charge no premiums and nominal cost sharing (eg, $4 per outpatient service) for Medicaid enrollees, the total spending of enrollees could still be financially catastrophic for individuals with very low income. Possibly, also, some states are charging higher premiums and cost sharing from Medicaid beneficiaries through waivers. Finally, those with a high deductible private health insurance plan could still have a catastrophic financial burden even with health insurance coverage when they receive expensive healthcare services.

Conclusion and policy implications

In summary, using a nationally representative sample of the low income, non-elderly population, we found lower out-of-pocket spending, lower out-of-pocket plus premium spending, and a lower likelihood of catastrophic financial burden in the third and fourth years after the implementation of the Affordable Care Act Medicaid expansions. Our findings suggest that the Act is probably achieving a key goal—improved financial risk protection from healthcare spending among low income adults.

Our study has important policy implications. The constitutionality of the Affordable Care Act is once again being challenged in the courts by attorneys from 18 states, and its repeal or substantial modification continues to be discussed by policy makers. Our findings suggest that, if our findings were causal, as many as one million low income individuals could face catastrophic financial burden nationally, if the Medicaid expansions were to be repealed.

Finally, even though our results show significant reductions in out-of-pocket spending and financial risk due to Medicaid expansions, an estimated 9.3 million Americans who were eligible for Medicaid in 2017 were still not enrolled, including an estimated 2.5 million who lived in states that had not expanded their Medicaid programs. These findings suggest that substantial barriers to Medicaid enrolment might persist not only in non-expanded states, but also in expanded states. Understanding and eliminating barriers to enrolment is important for the long term success of the Affordable Care Act.

https://www.bmj.com…

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Comment:

By Don McCanne, M.D.

The good news is that Medicaid expansions under the Affordable Care Act have been “successful nationally in improving financial risk protection against medical bills among low income adults.” The bad news is that “one in seven low income individuals could still have a catastrophic financial burden even in the expansion states after the implementation of Medicaid expansions.”

From a policy perspective, it is clear that merely adding a Medicare for All public option does nothing to correct these deficiencies in the Medicaid program, not to mention correcting the problems with inadequate subsidies for the ACA exchange plans, plus excessive deductibles and other cost sharing with employer-sponsored plans, and the instability of coverage for the 67 million people who left their jobs last year.

What this nation needs is the good news of making health care affordable and accessible for everyone without the perpetual appendages of bad policies that create financial hardship, physical suffering, and even death. Merely introducing a Medicare public option will not amputate these appendages, and the options discussed under repeal and replace would only makes things much worse.

We could have affordable health care for everyone by nationalizing our entire health care delivery system – creating a government owned and operated national health service – socialized medicine. But that would be too disruptive for prevailing American tastes.

We really can’t get around it. What we need is the single payer model of an improved Medicare for All. That would remove financial barriers to health care for everyone, forevermore.

The political debate today is between single payer Medicare for All, which would work well, and adding a Medicare public option to our highly dysfunctional system, which would leave tens of millions exposed to financial hardship and leave many of them without the care they need. The debate should not be between single payer and a public option, since only one of those would work. Instead, the debate should be between single payer Medicare for All and a national health service model of socialized medicine, either of which really would work. We should bring pressure on the pollsters and the media to present and discuss those two options.

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