Study Anticipates High Medicaid Costs

Policy makers should anticipate potential shortcomings and unexpectedly high costs associated with the expansion of Medicaid coverage under the Affordable Care Act of 2010, according to a study released Wednesday by researchers at the Harvard School of Public Health.

In an effort to provide insurance coverage to the 50 million uninsured Americans, the Affordable Care Act revised Medicaid to include more low-income adults by 2014. But according to the researchers, their analysis revealed much more uncertainty than the government’s estimates of the number of people who would become eligible for Medicaid and then elect to enroll.

The Congressional Budget Office and the Centers for Medicare and Medicaid Services predicted that 16 million Americans would elect to join the Medicaid program by 2014. But the Harvard researchers predict that as few as eight million or as many as twenty-two million uninsured individuals would actually enroll, increasing uncertainty surrounding the policy change.

“Medicaid expansion may be successful or not depending on how many people enroll,” senior author and Professor of Health Policy and Management Arnold M. Epstein said.

Based on their numbers, the researchers estimated that federal spending for increased Medicaid enrollees would range from $34 billion to $98 billion and create a demand for 4,500 to 12,1000 new physicians to care for the enrollees.

“This could leave a lot more people either having to go through [state] exchanges or being uninsured, or it could potentially cost us more than we expected,” Epstein said.

For any piece of legislation concerning federal spending, the CBO must determine the potential budget impact and can only produce one estimate. Together, the CBO and the CMS provided Congress with the estimate that 16 million Americans would join the Medicaid program.

“Our objective was to provide a more realistic range of how many people might be covered by Medicaid under ACA and what the implications would be for health care providers,” Professor of Health Policy and Economics Katherine Swartz said.

Led by Assistant Professor of Health Policy and Economics Benjamin D. Sommers, the researchers used a simulation model and national surveys to determine how many people would enroll in Medicaid.

The study suggests that legislators should be prepared for a broader number of possible new Medicaid enrollees. If the number is higher than anticipated, policy makers will have to increase care providers and compensate for the costs, Swartz said. If the number is lower, then they will have to develop a marketing strategy to encourage people to enroll, Swartz added.

“It’s going to be a lot of time for all this to iron itself,” Swartz said. “It’ll be 2019 or 2020 before we know.”

—Staff writer Melanie A. Guzman can be reached at melanieguzman@college.harvard.edu.