News Feature | October 21, 2014

Study: Medicaid Expansion Costs Surge Won't Last

Christine Kern

By Christine Kern, contributing writer

Medicaid ACO

Cost and utilization increases are predicted to be predominantly temporary.

As the Affordable Care Act saw expansion of Medicaid eligibility in 27 states, there was growing concern over rising costs that could overwhelm state budgets by 2017 – when federal subsidies no longer cover 100 percent of costs. Yet a recent study conducted by the UCLA Center for Health Policy Research suggests such fears are overblown.

The study concludes cost and utilization increases created by newly eligible Medicaid beneficiaries as a result of Medicaid expansion will be predominantly temporary. “We found that the surge doesn’t last long once people get coverage,” said Nigel Lo, a research analyst at the UCLA Center for Health Policy Research and the study’s lead author according to a press release.

“Our findings suggest that early and significant investments in infrastructure and in improving the process of care delivery can effectively address the pent-up demand for health care services of previously uninsured people. Fears that these new enrollees will overuse health care services are just not true.”

The UCLA study looked at data from two programs in California — the Health Care Coverage Initiative, which ran from 2007 to 2010, and the Low Income Health Program, which ran from 2011 to 2013. As part of the study, researchers determined that while beneficiaries of California’s Low Income Health Program did initially utilize ERs at a rate of 600 visits per 1,000 individuals during the first quarter of their enrollment (first quarter of 2011), by the end of 2011 and through 2013, overall usage declined by almost 70 percent, dropping to just 183 ED visits per 1,000. During that period, the group’s hospital admissions also declined by 78.5 percent.

The study also found, “Early and significant investments in infrastructure and in improving the process of care delivery can effectively address the pent-up demand for healthcare services of previously uninsured populations.”

According to the study, the preventative medical care and regular treatment for chronic diseases provided by California’s Low Income Health Program meant that the newly insured were no longer dependent on emergency room treatment and hospitalization. Improving care delivery through the use of an assigned source of primary care, care coordination and health risk assessments, as well as greater availability of specialty services and culturally competent self-care also potentially helped manage pent-up demand, they said.

“California’s success should set an example for states that are on the fence about expanding Medicaid,” said co-author Gerald Kominski, 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 health care needs, and keep cost increases to a manageable level.”