Medicaid expansion leaves more money in recipients' pockets

May 15, 2018, University of Michigan

Medicaid expansion under the Affordable Care Act reduced out-of-pocket medical expenses, allowing the poorest Americans to allocate their money for other life necessities, according to a new University of Michigan study.

Joelle Abramowitz, an economist with the U-M Institute for Social Research, examined the extent to which the expansion alleviated the burden of out-of-pocket costs of getting health insurance and then using it. These include costs such as monthly premiums, doctor's visit copays and copays for medication, medical supplies and vision aids such as glasses or contacts.

The study found that those living in states that expanded Medicaid were less likely to pay premiums for their Medicare insurance. These residents also saw their out-of-pocket medical expenses such as copays decrease.

"I studied people who were near or below the , who could do a lot with that money," said Abramowitz, an assistant research scientist with ISR's Survey Research Center. "On the other hand, if this leads people to seek care they wouldn't have sought before, they may end up spending more."

The findings also pointed to another outcome: Medicaid expansions also led to workers dropping their employer-sponsored health insurance. Abramowitz surmises that this is because Medicaid coverage may be better and less costly.

"One view could be that it's bad if people who could get private coverage to get coverage funded by taxpayers," Abramowitz said. "But I think what this highlights is the potential that the coverage they were getting through employers may have been of lower quality such that they couldn't afford the out-of-pocket costs associated with getting care, and accordingly, couldn't make use of the coverage."

After the Medicaid expansions, individuals with family income below 100 percent of the federal poverty level living in states that expanded Medicaid were 2.5 to 5.3 percent less likely to pay any money out of pocket for health insurance premiums compared to those living in states that did not expand.

Individuals with family income between 100 and 138 percent of the poverty level were 6.2 to 10.6 percent less likely to pay any money out of pocket for premiums. Individuals with between 100 and 138 percent of the poverty level were also 11.5 to 18.7 percent less likely to pay any money out of pocket for medical care and supplies. The 2018 for a family of two is $16,460 and for a family of three is $20,780.

Abramowitz used data from the 2011-2016 Current Population Survey Annual Social and Economic Supplement. This survey samples 100,000 households across the United States each year.

"If we think about, in the long run, the best way we as a country can increase our productivity and reach our potential, we need people to be healthy and seek care they need," Abramowitz said.

"If someone is not able to use their insurance and access healthcare, especially if they're paying for but can't afford to use it—that might mean they can't go to work or school, and that does not help them or our society to be the best it can. This is one more challenge making it more difficult for those already living in tough circumstances."

Explore further: Medicaid expansion cuts out-of-pocket spending

More information: Joelle Abramowitz. The Effect of ACA State Medicaid Expansions on Medical Out-of-Pocket Expenditures, Medical Care Research and Review (2018). DOI: 10.1177/1077558718768895

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