Medicaid Expansion Enrollees Increase Healthcare Costs

Non-safety-net hospitals have had a greater percentage increase in Medicaid enrollees since the expansion than have safety-net hospitals, according to recent research.

Jan. 25—Healthcare costs have continued to increase among those who enrolled in Medicaid under the healthcare reform eligibility expansion, according to a new analysis.

The Centers for Medicare & Medicaid Services (CMS) had expected healthcare costs for new enrollees to reach only 80 percent of those of traditional Medicaid enrollees. But the new enrollees’ costs were higher than those of traditional enrollees, and a new analysis showed that those costs continued to increase in the years after enrollment.

A new analysis from Avalere Health found that average monthly costs for expansion enrollees who gained coverage in the first half of 2014 increased from $324 to $389 over two and a half years—a 20 percent increase.

“Contrary to some expectations that Medicaid expansion enrollees would be relatively healthy, beneficiaries who have remained on the program have increasing healthcare needs, likely due to previously unidentified or untreated conditions,” Caroline Pearson, senior vice president at Avalere, said in a written statement.

The Office of the Actuary for CMS had projected in a 2016 report that costs for newly eligible enrollees would fall below those of previously eligible enrollees by 2018.

The new findings were based on a three-year analysis of claims from three Medicaid managed care insurers in nine expansion states. Although 11 million have gained Medicaid coverage since implementation of the Affordable Care Act’s (ACA’s) eligibility expansion in 2014, much of the increase has occurred in the 31 expansion states, where Medicaid enrollment has increased by nearly 40 percent, according to a Kaiser Family Foundation analysis.

Spending on new enrollees at first was focused on inpatient care—the largest initial share of claims costs—which the authors of the analysis attributed to the use of presumptive eligibility by hospitals to enroll uninsured patients.

Within eight months of enrollment, prescription drug costs—excluding hepatitis C treatments—surpassed inpatient costs. As prescription drug claims grew as a share of total claims costs, other categories of services—in particular, acute care services such as inpatient hospitalization and emergency department (ED) use—decreased in share.

“There are a number of possible reasons for this pattern; for example, enrollees may have received more outpatient and chronic care management as they established relationships with healthcare providers, thus increasing medication use but reducing complications requiring an ER visit or inpatient admission,” the authors wrote. “Alternatively, the trend may reflect higher underlying cost trends in pharmacy, as compared to other medical services.”

ED visits by beneficiaries in Medicaid and the Children’s Health Insurance Program increased by 25 percent, or more than 10 million, in the first year of the Medicaid expansion, according to an analysis of 2014 and 2013 data from the Centers for Disease Control and Prevention (CDC). However, credit-rating agencies have found that the increase in ED utilization at hospitals has slowed since the initial Medicaid expansion.

The study showed that pharmacy costs (excluding hepatitis C) almost doubled over the two-and-a-half-year time period that the initial cohort was tracked. The drug-spending increase indicated that the previously uninsured Medicaid expansion population may have had untreated conditions, and gaining access to health insurance helped them receive needed care. A 2016 analysis estimated that nearly 5 million previously uninsured individuals enrolled in Medicaid coverage during the first open-enrollment period (October 2013-March 2014) after enactment of the ACA.

“As new Medicaid beneficiaries gain a consistent and sustained source of insurance coverage, their spending patterns reflect improved care for chronic conditions and less need for acute hospitalizations,” said Michael Lutz, vice president at Avalere. “This suggests that newly insured populations have underlying health needs, but insurance coverage may help rationalize their healthcare spending in favor of longer-term, less costly treatments overall.”

Churn Challenge

Among the challenges of the newly covered population, as revealed by the analysis, was that more than 50 percent dropped Medicaid coverage within three years.

“Healthier, lower-cost enrollees may be more likely to churn off Medicaid after a shorter period of time,” Pearson said.

Previous research found that enrollees who churn between sources of coverage or between being covered and uninsured were less likely to have a regular source of care.

“Enrollment churn can also complicate provider and health plan efforts to provide coordinated, well-managed care for this population,” the authors wrote. “For example, enrollees who experience enrollment churn may miss needed healthcare visits or be less adherent to prescription regimens, putting them at risk for poorer outcomes.”

Hospital Utilization

Overall, non-safety-net hospitals were more likely after the expansion to have an increase in their share of Medicaid patients, compared with safety-net hospitals, according to separate recent research.

A study published in January in Health Services Research examined nine expansion states and found that from 2013 to 2014, Medicaid-funded hospital stays increased by about 14 percentage points more in non-safety-net hospitals than in their safety-net counterparts.

Safety-net hospitals had an average decrease of 146 uninsured stays, while Medicaid stays increased by 153 and privately insured stays were stable. Meanwhile, non-safety-net hospitals had 63 fewer uninsured stays and 33 fewer privately insured stays, while Medicaid stays increased by 105.

The authors wrote that the difference could stem from either patient preference for non-safety-net hospitals or from a crowd-out of private insurance.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare