Federal and state costs associated with the Affordable Care Act's Medicaid expansion are proving higher than previously estimated, which could rekindle the political debate over the law in the 2016 presidential race.
Newly eligible adults are estimated to have had average benefit costs of $5,517 in 2014, 19% greater than non-newly eligible adults' average benefit costs of $4,650, according to a new report from the CMS' Office of the Actuary. These estimates are significantly different from previous ones, according to the report, in which average benefit costs for newly eligible adults in 2014 were estimated to be 1% lower than those of non-newly eligible adults.
Opponents of the ACA argue the new figures may discourage additional states from expanding Medicaid eligibility under the law. Several policy experts, though, said the numbers simply show that the law is successfully extending care to people who previously couldn't get it.
Medicaid enrollment is estimated to have increased 9.6% to 64.6 million people in 2014 and will hit 78.8 million by 2023, .
Total Medicaid spending grew 9.4% between 2013 and 2014 to $498.9 billion. The CMS actuaries project it will reach $835 billion by 2023, increasing at an average rate of 6.2% per year over the next 10 years.
That's less than the $918.8 billion the CMS actuaries projected last fall. But they say in the report they were caught off guard by the financial impact of Medicaid expansion. “The average benefit costs of newly eligible adult enrollees are expected to have been substantially greater than those for non-newly eligible adult enrollees in the program,” they write.
The CMS theorizes that costs for new beneficiaries were higher because they were uninsured before gaining coverage under the ACA and are now getting care for unmet needs. Also, the actuaries note, most of the states that expanded Medicaid put newly eligible residents into managed care programs. On average, the capitation rates for the newly eligible adult enrollees were significantly greater than the projected average costs.
That may be because the rates in some states also included adjustments for adverse selection with the expectation that the people who were most likely to enroll in the first year would be those with the greatest health care needs, the agency says. The agency was also surprised by the magnitude of the new enrollment. It estimates 5.7 million adults joined the program in 2014. In a previous estimate, the agency anticipated 4.9 million enrollees for the year.
The report is likely to provide political ammunition in the debate over the healthcare reform law as the 2016 presidential election heats up.
“The Obama administration had projected (new beneficiaries) would cost about $50 less than other Medicaid-eligible adults, but they actually cost about $1,000 more,” said Michael Cannon, a critic of the Affordable Care Act and director of health policy studies for the Cato Institute, a libertarian think tank. Cannon said teh numbers "could give states that expanded Medicaid buyer's remorse and strengthen opposition to expanding Medicaid in states that haven't.”
Others, however, saw the numbers in a more positive light. “I am sure that Republicans will have a field day with this, but the fact of the matter is that it shows the programs is working as it is supposed to,” said Jim Manley, director of the communications practice at the consulting firm QGA and former spokesman for Sen. Harry Reid (D-Nev). “Naturally the more people covered means that costs will go up. Leaving people uncovered is not an option that we as a country can afford in the long run.”
Others agreed. “The excess costs for newly enrolled Medicaid recipients is typical. This typically reflects deferred utilization—people who can't afford healthcare can now access care and use it,” said Dan Mendelson, CEO of Washington-based consulting firm Avalere Health. “This is very often due to increased use of primary care, preventive care, and dental care, all of which are commonly deferred.”
Sara Rosenbaum, a healthcare policy expert at George Washington University, said the numbers suggest that the newly covered people are getting access to healthcare in spite of reports to the contrary.
And the per-beneficiary costs could come down in subsequent years, said Judy Solomon, vice president for health policy at the left-leaning Center on Budget and Policy Priorities. “The pent up demand and initial enrollment effects will diminish,” she said.