In Paragon’s new report, Medicaid Financing Reform: Stopping Discrimination Against the Most Vulnerable and Reducing Bias Favoring Wealthy States, we review how current policy discriminates against the people that Medicaid was intended to serve and propose an important reform.
The Affordable Care Act’s (ACA) Medicaid expansion added a new category of program recipients—able-bodied, working-age adults—and created a much higher federal reimbursement rate for them than for traditional Medicaid enrollees (low-income children, pregnant women, seniors, and the disabled). This payment differential encouraged spending on expansion enrollees at the expense of traditional Medicaid enrollees.
The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT) used to produce annual Medicaid actuarial reports show that spending per Medicaid expansion enrollee is much greater than expected when the ACA became law. The Paragon Pic shows the percentage that actual per enrollee federal Medicaid spending for 2014 to 2018 across eligibility groups differed to OACT’s projections in 2013, the year before the Medicaid expansion took effect. As discussed in Paragon’s report, the federal government spends about 20 percent less to provide coverage for the lowest-income exchange enrollees than for Medicaid expansion enrollees, a sign of the major inefficiency of the ACA expansion of Medicaid.
Per enrollee federal spending on expansion enrollees in 2018 exceeded OACT’s projections by 56.0 percent, while per enrollee federal spending on aged and disabled Medicaid enrollees was lower than projections by 25.4 percent and 11.3 percent, respectively. Per capita spending on children was somewhat higher than OACT projected, and spending on non-disabled adults who were eligible for Medicaid prior to the expansion was somewhat lower.
The numbers from OACT include spending in both expansion states and non-expansion states, which blurs the picture, as the reallocation of health care services away from traditional enrollees and toward expansion enrollees would not occur in non-expansion states. In December 2022, the Mercatus Center released a study that separated out expansion states and non-expansion states and assessed spending trends across eligibility categories. Mercatus found strong evidence that resources were diverted away from traditional enrollees to expansion enrollees.
Several recent studies provide evidence of reduced health care access for Medicaid enrollees in expansion states. One found that Medicaid recipients in expansion states significantly delayed medical care because no appointment was available or because wait times were too long. Another found that Medicaid expansion was related to a significant increase in the amount of time it took for ambulances to respond. And a meta-analysis in Inquiry suggested that Medicaid enrollees were one-third less likely to obtain doctor appointments after expansion.
