Medicaid expansion costs higher than expected

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The expansion of Medicaid eligibility has been more expensive than anticipated, a new report says--a finding that complicates the federal government’s argument that the Affordable Care Act helps lower costs.

The report, from the Centers for Medicare & Medicaid Services' Office of the Actuary, says the average cost per newly eligible adult Medicaid enrollee in 2015 was $6,366, which is about 49 percent higher than last year’s report estimated. By comparison, the cost per newly eligible adult enrollee in 2014--$5,488--was about 1 percent lower than previously estimated.  

It’s possible that states reported greater Medicaid expenditures in 2015 that were incurred in 2014, making per-enrollee costs appear higher than they actually were, the report notes.

Yet it says the differences in the estimates happened largely because capitation rates for Medicaid managed care--which many expansion states opted to implement--were set at higher levels than anticipated for newly eligible adults.

States’ risk-sharing arrangements in their contracts with managed care plans also are a factor, the report adds. Though few states have reported the results of these provisions, “it is also possible--although unlikely--that the net effect on federal expenditures would be an increase in costs as opposed to a decrease in costs,” the report says.

To health economist and former Republican congressional aide Brian Blase, the report shows the fallacy of the Obama administration’s assurances that the Medicaid expansion population would be less costly, he tells the Associated Press.

But CMS spokesman Aaron Albright tells the news service that it is normal for estimates to change as new data come in. “The bottom line is that a growing body of evidence shows that Medicaid expansion improves the health of states’ citizens, while reducing the burden of uncompensated care,” he said.

- read the report (,pdf)
- here’s the AP article