As the Legislature returns to Augusta this winter, some might suggest an arrangement under which Maine uses federal funds meant to expand Medicaid to instead purchase private insurance for low-income residents.
It’s an approach that’s proved more politically palatable to Republicans across the country than a direct Medicaid expansion. Arkansas, with a Democratic governor and Republican legislature, blazed the trail for the arrangement, securing the federal government’s approval to try it out. In Iowa, Republican Gov. Terry Branstad has followed suit. A number of other Republican governors are also interested. Maine Gov. Paul LePage is paying attention to those developments while he remains opposed to an expansion, his spokeswoman has said.
But is expanding coverage by having the state pay for private insurance for some of its poorest residents a good idea?
Arkansas Gov. Mike Beebe is out to prove it is. In applying for federal approval for the Medicaid expansion alternative, Arkansas said it would seek to prove those who receive private insurance rather than Medicaid will have access to more care providers than their Medicaid counterparts, will use the emergency room less and will “churn” in and out of health plans less frequently as their incomes and eligibility for services change. The idea is they would be able to stick with a private plan even if they no longer qualified for Medicaid.
In addition, Arkansas said it would get those results at a comparable cost to traditional Medicaid.
We’re eager for the results on those first three points, and we think there’s a good chance Arkansas will be proved right. On the last point, cost, we have our doubts.
There’s a reason people with low incomes don’t enroll in private insurance: They can’t afford it. Indeed, it might be unwise to read too deeply into early Obamacare enrollment numbers, but just 41 percent of those who qualified by the end of November to enroll in private insurance through the law’s exchanges had incomes low enough to receive federal subsidies meant to defray the cost. To qualify for those subsidies, someone has to make between 100 percent and 400 percent of the federal poverty level — between $26,951 and $78,120 for a three-person family.
The new participants in Arkansas’ alternative Medicaid model won’t have to pay monthly premiums, but many of them will ultimately be responsible for cost sharing — including deductibles and copayments. Even with the Affordable Care Act’s annual caps on the amount someone can spend out of pocket on medical expenses, a three-member family participating in Arkansas’ Medicaid expansion making less than $27,000 could still end up paying more than $4,200 out of pocket on medical expenses. That’s nearly 16 percent of annual income for a family that’s unlikely to have much money to spare.
Out-of-pocket expenses for traditional Medicaid recipients are typically significantly lower than for those covered by private insurance. If an average uninsured adult with a low income in 2005 (up to about $32,000 for a three-person family that year) enrolled in private insurance, his or her out-of-pocket medical expenses would have been $771, according to a 2008 study in the journal Health Affairs. That amount is more than seven times the total out-of-pocket expenses a traditional Medicaid recipient would incur.
Beyond affordability, the Health Affairs study found total medical spending was significantly higher with private insurance than with Medicaid. For that same average, low-income uninsured adult, the total medical spending in 2005 would have been $3,899 with private insurance — with costs split between the insurer and recipient — and $3,084 with Medicaid.
That’s more than 26 percent higher spending with private insurance — and a key goal of the Affordable Care Act is to rein in total medical spending. For context, total U.S. health care spending grew 60 percent between 2005 and 2011.
Lower Medicaid payments for health care providers explain part of the discrepancy, but the insurance plans for that average, low-income uninsured adult — Medicaid vs. private insurance — paid basically the same amount. The consumer was expected to make up the difference out of pocket.
Essentially, if the goal is to make health coverage more affordable and reduce total medical spending, private insurance for the lowest-income residents doesn’t appear to accomplish those goals.