With Time, Costs Grow For Medicaid Expansion Beneficiaries

Enrollees show signs of pent-up demand with acute healthcare needs early in their enrollment, but over time costs increase substantially and shift toward chronic care.

Spending for the Medicaid expansion population increased steadily over time for beneficiaries who remained enrolled in the program, according to a new analysis from Avalere Health.

The study found that the average monthly costs for expansion enrollees who gained coverage in the first half of 2014 were $324 during the first six months of coverage. Two-and-a-half-years later, for those who were still enrolled, the average monthly costs over six months rose to $389—a 20% increase.

The analysis also found that younger enrollees are more likely to disenroll, which means that healthier enrollees may be disenrolling or losing Medicaid eligibility, while expansion enrollees with sustained enrollment in the program are more likely to have chronic health needs.

Related: Medicaid Expansion States See Uptick in ER Visits

"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," said Caroline Pearson, senior vice president at Avalere. "Healthier, lower-cost enrollees may be more likely to churn off Medicaid after a shorter period of time."

The share of spending for inpatient hospital care and emergency room visits decreased over time among the expansion population, especially in the first few months of coverage. However, spending increased for chronic care services, such as prescription drugs. Among those enrolled in early 2014, inpatient spending initially made up the largest share of costs, but was surpassed by prescription drug spending by the eighth month of enrollment.

Avalere said those finding suggest that expansion enrollees, largely uninsured before 2014, had significant medical needs when they enrolled, or that many expansion enrollees enrolled as a result of an inpatient encounter. As beneficiaries spend more time with insurance coverage and establish relationships with physicians, their healthcare costs shift toward outpatient visits and prescription drugs, and away from hospitalizations, which reflect acute health needs.

Avalere examined claims data from January 2014 through December 2016 from three Medicaid managed care organizations offering coverage in states that expanded Medicaid on Jan. 1, 2014.

The Affordable Care Act gave states the option to offer Medicaid to childless adults aged 19-64 who earn less than $16,643, which is 138% of poverty. Medicaid covers approximately 76 million Americans, about 15 million of whom are on the expanded population. Eighteen states have declined to expand their Medicaid programs.