Anesthesia Management: Will the cost of Medicaid expansion overwhelm state governments?

Increased healthcare service utilization and higher program costs resulting from Medicaid expansion are likely temporary and won’t have a disastrous impact on state budgets, according to a study from the UCLA Center for Health Policy Research.

UCLA researchers examined claims data from 182,000 people who gained insurance through two of California’s public health insurance programs — the Low Income Health Program (which ran from 2011 to 2013) and the Health Care Coverage Initiative (2007-2010). LIHP ended in January of this year when enrollees transitioned to the state’s Medicaid program, Medi-Cal, after its expansion under the Patient Protection and Affordable Care Act.

The researchers found that people who had the least medical care before enrolling in LIHP had a high rate of emergency department use: 600 visits per 1,000 people. However, from 2011 to 2013, this rate declined by 69.5 percent to 183 ED visits. Additionally, hospital admissions among enrollees declined by 78.5 percent (from 194 to 42 per 1,000 enrollees) during the same time period.

“California’s success should set an example for states that are on the fence about expanding Medicaid,” said co-author Gerald Kominski, PhD, professor of health policy and management and director of the Center for Health Policy Research. “It’s an investment: Build more infrastructure and care delivery early on, and you can manage chronic care, address unmet healthcare needs and keep cost increases to a manageable level.”

The PPACA gives states the option of expanding Medicaid to people earning as much as 138 percent of the federal poverty level. The federal government will pay 100 percent of the costs for this newly eligible group through 2016 and then scale back funding gradually to 90 percent in the following years. So far, 27 states have expanded their Medicaid programs, according to the study.

States have also anticipated spending more on Medicaid because of higher enrollment driven by the “woodwork effect” — when peoplewho were eligible before expansion but not enrolled sign up because of increased awareness.For instance, in California earlier this year, Democratic Gov. Jerry Brown released a budget containing an additional $1.2 billion in spending for Medi-Cal.