Study Suggesting Medicaid Expansion Could Lower Premiums Raises More Questions Than Answers

MacIver News Service | May 9, 2019

MADISON – On Tuesday, the Office of the Commissioner of Insurance (OCI) released a study suggesting that individual market premiums in Wisconsin could drop under a Medicaid expansion. It is a flawed and politically self-serving study that fails to account for many basic considerations.

The study, authored by consulting firm Wakely, estimates that 25,000-30,000 people whose incomes are between 100-138% of the federal poverty level are on the individual market. It goes on to cite two other studies that found premiums in states that expanded Medicaid are between 7 percent and 11 percent lower than in states that did not, suggesting the same could happen here.

The study claims this is because the lower-income people who would become eligible for Medicaid are a higher-risk, higher-cost population, and moving them onto Medicaid would reduce premiums by moving that increased spending off the private market.

The Wakely study overlooks several important considerations, leaving a number of questions about the politically motivated conclusion it attempts to draw. Among the problems:

  • The study assumes all or a large majority of those people would move to Medicaid. But with subsidized private health insurance all but free in some areas of the state – a matter of a few cents per month in some cases – that’s a big assumption.
  • It also takes only a very narrow look at individual market premiums, which itself is only a small share of the overall private health insurance market. Fifty-seven percent of Wisconsinites get their coverage from their employer, not on the individual market. The study might mislead some people into thinking Medicaid expansion could lower the cost of of their employer-sponsored plan.
  • The study ignores the likely increased cost to taxpayers of moving tens of thousands of people the study itself admits are sicker, higher-risk, and higher-cost onto Medicaid, a program notorious for its low reimbursement rates.
  • It also fails to ask will happen if one-tenth of the individual market moved onto Medicaid, a program that reimburses providers at a fraction of the rate that private insurance does. By moving people off private insurance and onto a government program that pays doctors and hospitals significantly less, cost-shifting by providers onto private insurance payers could offset any savings, even increasing costs to employer-sponsored plans. Also, some providers may begin denying Medicaid patients, reducing access to health care for a population the study itself admits needs it most.
  • Lastly, the study makes no mention of Wisconsin’s reinsurance program, which led to a reduction in individual market premiums last year. Reinsurance, also known as the Wisconsin Health Care Stability Plan, is a major feature of Wisconsin’s individual market that can’t be ignored in attempting to estimate what would happen to premiums if the Medicaid expansion population were to leave the market en masse.

MacIver Institute President Brett Healy issued the following statement:

“This study will no doubt become a talking point for Medicaid expansion supporters in short order. Unfortunately, it leaves the public with a very incomplete, very flawed understanding of the debate. 

“We can’t lose sight of the big picture: Do we as a state want more people on a costly and inefficient government program, or more people in the private market? I think hard-working taxpayers would agree that they’re already paying enough to help low-income people get affordable, subsidized plans. Expanding Medicaid would only double-charge taxpayers for something they’re already paying for.”