Another false alarm on the costs of Medicaid expansion

The universe of people obsessed with my Twitter debates with Michael Cannon presumably went ecstatic over our weekend exchange, which centered on Cannon’s short Friday column: “Your Friday afternoon news dump: Obama admin. Admits Medicaid expansion costs more than projected.” Michael and I disagree on everything. He is the Cato Institute firebrand who has apparently dedicated his life to destroying the Affordable Care Act. But he is a smart guy. I often learn from what he writes even as I disagree with it.  Cannon quotes from a recently-released Medicaid actuary report, which bears careful reading.

Michael’s first sentence made my heart sink: “It appears that Medicaid-expansion enrollees are going to cost the states a lot more than they thought.” Given the current knife fight over getting states to expand their Medicaid programs, this would be quite damaging. We know, for for example, that behavioral health costs are significant in a subset of new enrollees. There are also complicated interactions with other state and federal assistance programs. It’s certainly plausible that Medicaid expansion will turn out to be more costly than originally thought.

Because he is such a firebrand happy warrior, I have learned to follow up on his hotlinks to see what else might be going on. So I hunted down the report and ran the numbers. The actuaries did indeed predict higher costs—but almost all in the first year when states wouldn’t have to pay any of these costs. (The higher costs seem to reflect pent-up demand and perhaps more pregnant women than predicted in this particular Medicaid pool. I would like to learn more about what’s happening as states gain experience in the expansion population.)

I also ran the actual numbers from this year and last-year’s reports. The increase in predicted annual* costs per enrollee are shown below, broken down between the states and the federal government. The increased cost to the states averages that Michael warns us about are…. about $5/enrollee per year between 2014 and 2022. If you’re having trouble finding it, its the blue line visually indistinguishable from zero. To Michael’s credit, he’s told me he will modify the post. He certainly should.

2013-14 differences in actuarial prediction

The increased costs to the federal government are shown in red. The difference here is about $881 in the first year as the Medicaid expansion gets rolling, and then plunges in subsequent years, averaging out at about $95/enrollee per year.  That’s something like 2.2% of average non-disabled adult Medicaid costs. Despite the initial upward bump, things are quite manageable. It’s certainly not the sort of bad news one must conceal in a Friday news dump.

The main good news  about the overall Medicaid program is below the fold. Continue Reading…

If you like your reduced ER use, you can keep it

IMG_1553The latest results are in from the great Oregon Health Insurance Experiment (OHIE).

In a randomized experiment, individuals offered Medicaid coverage showed higher rates of emergency department (ED) use than did their otherwise comparable peers not given the same opportunity.

The effect size was pretty small—about one extra ED visit per recipient, every 3.5 years or so. In dollar terms, this amounts to an estimated annual expenditure increase of something like $120 per recipient. We can’t say from this paper whether the extra ED visits were valuable or cost-effective. We can say that these results will embarrass some liberal advocates who argued that expanded coverage would reduce overall rates of ED use.

They should. This talking point was never properly evidence-based or even particularly plausible given prior research. It’s not obvious that reducing the rate of ED use is even a sensible policy goal. Advocates across the political spectrum should stop using the ED for cheap talking points about the mythical savings associated with universal coverage or about the misbehavior of Medicaid recipients who supposedly waste huge amounts of money through overuse.

We might, instead, take some satisfaction that we have created a system, open 24 hours per day, 365 days per year, which people turn to when they need help. Our challenge is to make this system work.

More here.

Getting the knowledge on health reform from the New Republic’s Jonathan Cohn

During the health reform fight, a handful of people emerged with distinctive voices, who had a huge impact. The best of them combined the policy expertise, empathy, and graceful writing to command public attention as we finally extended health insurance coverage to millions of people.

Jonathan Cohn, senior editor of the New Republic was certainly one of those people. His award-winning 2007 book Sick chronicled the plight of uninsured and underinsured Americans. The New Yorker’s Atul Gawande called Sick “stunningly important … In one damning true story after another, Jonathan Cohn lays bare the tragedy of our health care system.”

Jonathan also originated and ran an influential blog called “The Treatment,” covering the daily fight over health reform. I was a special correspondent for “The Treatment” during 2009 and 2010. Having Jonathan as my editor there was a just a very special opportunity for me in my midlife-crisis journalism career.

Jonathan and I sat down for a two-part video conversation at healthinsurance.org regarding how health reform is going, the President’s inaugural address, and other matters. Please check it out.

Some of the video is included above. An edited  transcript follows, below the fold, for those who prefer.

Continue Reading…