It costs less to cover low-income people under government-sponsored health insurance, such as Medicaid, than through private insurance, according to a study published online by Health Affairs.
By comparing medical costs for a family of four with income below 200% of the federal poverty level, or $42,400 annual income, the authors concluded that Medicaid coverage for a full year was cheaper than private insurance coverage. Medical spending for a low-income adult was $3,084 in 2005, compared with $3,899 for private insurance (the study included both employer-sponsored and individual plans). Medical spending was defined as costs paid to providers, not premiums or capitation payments to insurers.
Annual out-of-pocket spending for that adult individual under Medicaid was $109 in 2005, compared with $771 through private coverage. Total per-person medical spending for low-income adults is higher through Medicaid than private insurance because Medicaid beneficiaries tend to be sicker than the average population. But when adjusted for health status, public coverage costs less than private insurance overall, conclude study authors Leighton Ku, professor at George Washington University, and Matthew Broaddus, a research analyst at the Center of Budget and Policy Priorities.
The authors used 2005 data from the Medical Expenditure Panel Survey, conducted by the Agency for Healthcare Research and Quality. -- by Rebecca Vesely