Newly eligible Medicaid beneficiaries more costly to cover than expected

It was more expensive than anticipated to cover newly eligible individuals under Medicaid, according to a recent report, a finding that may raise concerns for states weighing expansion of the program in the wake of the Supreme Court's ruling to uphold a key provision of the Affordable Care Act.

The report, from the Centers for Medicare & Medicaid Services' office of the actuary, finds that adults who became eligible for Medicaid in 2014 racked up $5,517 in average medical costs, overall costing the program $23.7 billion last year. In comparison, non-newly eligible adults' average benefit costs totaled $4,650 per person.

This is significant because past reports estimated that the average cost for newly eligible beneficiaries would be 1 percent lower than for the previously eligible. Instead, the cost was 19 percent higher.

This discrepancy could be due to the fact that Medicaid put many of the newly eligible adults into managed care programs, "and on average the capitation rates for the newly eligible adult enrollees were significantly greater than the projected average costs previously calculated," the report states.

In addition, the report suggests many new Medicaid enrollees were likely to have been previously uninsured and thus have unmet--and costly--healthcare needs.

Medicaid spending grew to $498 billion in 2014, a 9.4 percent increase from 2013, the new CMS report states. Spending on the program is expected to increase an average of 6.2 percent each year to reach $835 billion in 2023. States that have expanded the program, however, enjoy significant financial benefits, past research has shown.

After the Supreme Court ruled in favor of keeping federal subsidies for health insurance in all states, President Barack Obama said his next goal was to convince governors in states that have not expanded Medicaid to do so. But while several states have begun to explore expanding the program through alternative plans that require beneficiaries to pay monthly premiums, many Republican state officials remain skeptical of the costs associated with Medicaid expansion.

To learn more:
- check out the report (.pdf)

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