Medicaid Spending Growth Compared to Other Payers: A Look at the Evidence

Executive Summary
  1. Teresa A. Coughlin, Sharon K. Long, Lisa Clemans-Cope, and Dean Resnick. What Difference Does Medicaid Make? Assessing Cost Effectiveness, Access, and Financial Protection under Medicaid for Low-Income Adults. (Washington, DC: The Kaiser Family Foundation, May 2013), https://www.kff.org/medicaid/issue-brief/what-difference-does-medicaid-make-assessing-cost-effectiveness-access-and-financial-protection-under-medicaid-for-low-income-adults/

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  2. Jack Hadley and John Holahan. “Is Health Care Spending Higher under Medicaid or Private Insurance?” Inquiry 40 (2003):323-42.

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  3. Rachel Garfield, Robin Rudowitz, Katherine Young, Laura Snyder, Lisa Clemans-Cope, Emily Lawton and John Holahan. Trends in Medicaid Spending Leading up to ACA Implementation. (Washington, DC: The Kaiser Family Foundation, February 2015), http://files.kff.org/attachment/issue-brief-trends-in-medicaid-spending-leading-up-to-aca-implementation.

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  4. Stephen Zuckerman, Laura Skopec and Kristen McCormack. Reversing the Medicaid Fee Bump: How Much Could Medicaid Physician Fees for Primary Care Fall in 2015? (Washington, DC: The Urban Institute, December 2014), http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000025-Reversing-the-Medicaid-Fee-Bump.pdf.

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  5. Daniel R. Levinson. Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a Substantial Margin. (Washington DC, Department of Health and Human Services Office of Inspector General, April 2015), http://oig.hhs.gov/oei/reports/oei-03-13-00650.pdf.

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Issue Brief
  1. U.S. Government Accountability Office (GAO). Medicaid Payment: Comparisons of Selected Services under Fee-for-Service, Managed Care, and Private Insurance. (Washington, DC: U.S. Government Accountability Office, July 2014), http://www.gao.gov/products/GAO-14-533

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  2. Congressional Budget Office. The 2014 Long-term Budget Outlook. (Washington, DC: CBO, July 2014), https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/45471-Long-TermBudgetOutlook_7-29.pdf

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  3. Alison Mitchell. Medicaid Financing and Expenditures. (Washington, DC: Congressional Research Service, December 2015).

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  4. Katherine Baicker, Sarah L. Taubman, Heidi L. Allen, et al. “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine 368 (2013):1713-22.

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  5. Susan H. Busch and Noelia Duchovny. “Family Coverage Expansions: Impact on Insurance Coverage and Health Care Utilization of Parents,” Journal of Health Economics 24, no. 5 (2005):876-890.

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  6. Embry M. Howell and Genevieve M. Kenney. “The Impact of the Medicaid/CHIP Expansions on Children: A Synthesis of the Evidence.” Medical Care Research and Review (2012):372-96.

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  7. Stacey McMorrow, Genevieve Kenney, Sharon Long and Dana E. Goin. “Medicaid Expansions from 1997 to 2009 Increased Coverage and Improved Access and Mental Health Outcomes for Low‐Income Parents.” Health Services Research (2016), doi: 10.1111/1475-6773.12432.

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  8. Tal Gross and Matthew Notowidigdo. “Health Insurance and the Consumer Bankruptcy Decision: Evidence from Expansions of Medicaid.” Journal of Public Economics 95 no. 7-8 (2011):767-778.

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  9. Janet Currie and Jonathan Gruber. “Health Insurance Eligibility, Utilization of Medical Care, and Child Health,” The Quarterly Journal of Economics 111 no. 2 (1996):431-466.

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  10. Janet Currie and Jonathan Gruber. “Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women,” Journal of Political Economy 104, no. 6 (1996):1263-1296.

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  11. Dana P. Goldman, Jayanta Bhattacharya, Daniel F. McCaffrey, et al. “Effect of Insurance on Mortality in an HIV-Positive Population in Care.” Journal of the American Statistical Association 96, no. 455 (2001):883-894.

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  12. Benjamin D. Sommers, Katherine Baicker, and Arnold M. Epstein. “Mortality and Access to Care among Adults after State Medicaid Expansions,” New England Journal of Medicine 367 (2012):1025-1034.

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  13. Laura R. Wherry and Bruce D. Meyer. “Saving Teens: Using a Policy Discontinuity to Estimate the Effects of Medicaid Eligibility,” Journal of Human Resources (November 2015): epub ahead of print.

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  14. Baicker et al 2013.

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  15. McMorrow, Kenney, Long, & Goin, 2016.

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  16. Rourke L. O’Brien and Cassandra Robertson. Medicaid and Intergenerational Economic Mobility. (Madison, WI: University of Wisconsin-Madison, Institute for Research on Poverty (IRP) Discussion Paper No. 1428-15, April 2015), http://www.irp.wisc.edu/publications/dps/pdfs/dp142815.pdf

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  17. Sarah Miller and Laura Wherry. The Long-Term Effects of Early Life Medicaid Coverage. (Ann Arbor, MI: University of Michigan Working Paper, August 2015).

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  18. Sarah Cohodes, Daniel Grossman, Samuel Kleiner and Michael M. Lovenheim. “The Effect of Child Health Insurance Access on Schooling: Evidence from Public Insurance Expansions.” Journal of Human Resources. (2015): epub ahead of print

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  19. David W. Brown, Amanda Kowalski and Ithai Z. Lurie. Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts? (National Bureau of Economic Research Working Paper, No. 20835, January 2015).

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  20. Todd Gilmer and Richard Kronick. “Differences In The Volume Of Services And In Prices Drive Big Variations In Medicaid Spending Among US States And Regions,” Health Affairs 30, no. 7 (2011):1316-1324.

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  21. Bruce Landon, Eric Schneider, Sharon-Lise Normand, et al. “Quality of Care in Medicaid Managed Care and Commercial Health Plans,” JAMA 298, no. 14 (2007):1674-81.

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  22. Margaret S. Colby, Debra J. Lipson and Sarah R. Turchin. “Value for the Money Spent? Exploring the Relationship between Expenditures, Insurance Adequacy, and Access to Care for Publicly Insured Children.” Maternal and Child Health Journal 16, Supp 1 (2012):51-60.

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  23. Coughlin, et al. 2013

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  24. Hadley and Holahan 2003.

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  25. Leighton Ku and Matthew Broaddus. “Public And Private Health Insurance: Stacking Up the Costs,” Health Affairs 27, no. 4 (2008):w318-w327.

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  26. Leighton Ku. “Medical and Dental Utilization and Expenditures Under Medicaid and Private Health Insurance,” Medical Care Research and Review 66, no. 4 (2009):456-71.

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  27. Dental care was also examined but the comparison with private is influenced by the fact that in 2005, many states offered minimal dental coverage or no dental coverage in Medicaid.

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  28. Coughlin, Long, Clemans-Cope, & Resnick, 2013

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  29. The MEPS-based analyses do not capture Medicaid payments that are not associated with a specific service, such as Medicaid disproportionate-share hospital (DSH) payments.

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  30. Congressional Budget Office. Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision (Washington, DC: Congressional Budget Office, July 2012), https://www.cbo.gov/publication/43472

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  31. Garfield, et al., 2015

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  32. Katherine Young, Rachel Garfield, Lisa Clemans-Cope, Emily Lawton, and John Holahan. Enrollment-Driven Expenditure Growth: Medicaid Spending during the Economic Downturn, FY 2007-2011. (Washington, DC: Kaiser Family Foundation, April 2013), https://www.kff.org/medicaid/report/enrollment-driven-expenditure-growth-medicaid-spending-during/

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  33. Katherine Young, Lisa Clemans-Cope, Emily Lawton, and John Holahan. Medicaid Spending Growth in the Great Recession and Its Aftermath, FY 2007-2012. (Washington, DC: The Kaiser Family Foundation, July 2014), https://www.kff.org/wp-content/uploads/2014/07/8309-03-medicaid-spending-growth-in-the-great-recession-and-its-aftermath-fy-2007-2012.pdf

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  34. Garfield, et al., 2015

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  35. Garfield, et al., 2015

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  36. The CBO estimates that total Medicaid spending (including state spending) rose from 0.9 percent of GDP in 1985 to 2.9 percent in 2014, and that net federal Medicaid spending rose from 0.5 percent of GDP in 1985 to 1.7 percent in 2014. While estimates show that net federal spending for Medicaid over much of that period grew only about as quickly as the overall economy did, in 2014 Medicaid spending growth was much higher, largely due to the expansion of Medicaid coverage under the ACA. As a result, between 2013 and 2014, net federal Medicaid spending grew by 13.6 percent to $301 billion in 2014—with another $195 billion in Medicaid spending by states in 2014. Congressional Budget Office. The 2015 Long-Term Budget Outlook. (Washington, DC: Congressional Budget Office, June 2015), https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50250-LongTermBudgetOutlook-3.pdf

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  37. The CBO calculates excess growth as growth in health care spending per person relative to the growth of “potential” gross domestic product (GDP) per capita (i.e. CBO’s estimate of the maximum sustainable GDP) after adjusting for demographic changes’ impact on health care spending.

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  38. CBO’s calculations take the weighted average of the annual excess cost growth rates between 1975 and 2013 by placing twice as much weight on the latest year as on the earliest year and setting the weights for intermediate years by following a linear progression between the two.

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  39. Congressional Budget Office, 2015

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  40. John K. Iglehart and Benjamin D. Sommers. “Medicaid at 50 — From Welfare Program to Nation’s Largest Health Insurer,” New England Journal of Medicine, 372 (2015):2152-2159.

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  41. CMS Office of the Actuary. 2014 Actuarial Report on the Financial Outlook for Medicaid. (Washington, DC: Department of Health and Human Services, Centers for Medicare and Medicaid Services, 2014), https://www.medicaid.gov/medicaid-chip-program-information/by-topics/financing-and-reimbursement/actuarial-report-on-financial-outlook-for-medicaid.html

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  42. Historical 2014 enrollment data was not available for this analysis; enrollment was projected to increase by 12.9 percent, to 66.5 million.

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  43. Sean P. Keehan, Gigi A. Cuckler, Andrea M. Sisko, et al. “National Health Expenditure Projections, 2014–24: Spending Growth Faster than Recent Trends,” Health Affairs 34, no. 8 (2015): 1407-17.

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  44. Problems accessing care for Medicaid enrollees are not discussed at length in this review. Literature on the relationship between Medicaid enrollees’ access to care and low payments to providers finds access problems, although most measures of access to care are comparable to private coverage. In particular, research has shown that higher Medicaid provider rates have a small to moderately positive impact on access to care for a range of types of care: physician care (Sandra L. Decker. “In 2011 Nearly One-Third Of Physicians Said They Would Not Accept New Medicaid Patients, But Rising Fees May Help,” Health Affairs 31, no. 8 (2012): 1673-1679.), dental care for children (Thomas C. Buchmueller, Sean Orzol, and Lara D. Shore-Sheppard. The Effect of of Medicaid Payment Rates on Access to Dental Care Among Children. (NBER Working Paper No. 19218, July 2013), and other types of care. Yet overall, studies show that, after adjusting for health and socio-demographic factors, the vast majority of Medicaid enrollees have good access to care and fewer unmet health needs compared to those who lack insurance, and generally similar access to care and unmet needs compared to privately insured enrollees (Coughlin, et al. 2013; Genevieve Kenney and Christine Coyer. National Findings on Access to Health Care and Service Use for Children Enrolled in Medicaid, MACPAC Contractor Report No. 1. (Washington DC: TheURban Institute, March 2012), https://www.macpac.gov/wp-content/uploads/2015/01/Contractor-Report-No_1.pdf).

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  45. Zuckerman, Skopec, & McCormack, 2014.

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  46. Stephen Zuckerman and Dana Goin. How Much Will Medicaid Physician Fees for Primary Care Rise in 2013? Evidence from a 2012 Survey of Medicaid Physician Fees. (Washington, DC: The Urban Institute, December 2012), http://www.urban.org/research/publication/how-much-will-medicaid-physician-fees-primary-care-rise-2013-evidence-2012

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  47. Zuckerman, Skopec and McCormack 2014

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  48. Thomas M. Selden, Zeynal Karaca, Patricia Keenan, Chapin White and Richard Kronick. “The Growing Difference between Public and Private Payment Rates for Inpatient Hospital Care,” Health Affairs 34, no. 12 (2015):2147-2150.

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  49. Levinson, 2015

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  50. GAO, 2014

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  51. American Hospital Association. Trendwatch Chartbook 2015, Table 4.4: Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare. (Chicago, Illinois: American Hospital Association, 2015), http://www.aha.org/research/reports/tw/chartbook/2015/table4-4.pdf

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  52. This evidence demonstrates that Medicaid reimbursements for hospital-based services are lower than those for private payers. While private payments may cross-subsidize public payments, this does not imply “cost shifting” in the sense that providers are not likely to decrease private insurer’s reimbursement rates if Medicaid rates increase, and providers are similarly not likely to be able to increase the rates they have negotiated with private insurers if Medicaid rates decrease. Although some cost-shifting may occur at the margin, research evidence shows that cost-shifting is not widespread. Austin B. Frakt, A. B. “How Much Do Hospitals Cost Shift? A Review of the Evidence.” Milbank Quarterly 89, no. 1 (2011) 90-130.

     

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