Out-of-Pocket Spending in the Marketplaces for Adults in States Not Expanding Medicaid

Under Supreme Court’s ruling on the Affordable Care Act, each state has the option to expand Medicaid eligibility to nearly all nonelderly adults with modified adjusted gross income (MAGI) no more than 133% of the federal poverty guidelines (FPG) with a 5% income disregard, and not enrolled in Medicare.  This study focuses on the adults with MAGI between 100 and 138% of FPG.  In the states that do not expand Medicaid, most uninsured adults in this income range can use the premium tax credits in the marketplaces to obtain coverage.   By pooling six years of the Medical Expenditure Panel Survey (MEPS), 2005-2010, this paper describes the 5.3 million adults in this income range in states that are not expanding Medicaid.  States may reconsider and decide to expand Medicaid, and they may wish to consider the consequences for this population.  Therefore, out-of-pocket spending of uninsured adults in this income range is simulated (1) as if they were enrolled in Medicaid and (2) as if they obtained private insurance through the marketplaces.  Both programs have provisions to limit out-of-pocket spending.

Both simulation and regression methods were used.  MAGI is simulated using final federal regulations and details collected in the MEPS about types and amounts of personal and family income.  The lowest silver plan premiums are merged onto the MEPS by rating area and age.  Tobacco surcharges were calculated for smokers.  Net premiums are reduced by premium tax credits. Regression analysis is used to predict the potential out-of-pocket spending for medical care on the uninsured who would be eligible for premium tax credits, that is, those without access to employment-related insurance through their own or a family member’s job (N=1,650).  For the marketplaces, out-of-pocket spending is estimated using those with MAGI below 200% of FPG and insurance through large employers for the entire year (N=5,328).  While the benchmark plans for the marketplaces are small employers, the actuarial values of the plans for which this population will be eligible will be much closer to those of large employers.  The regression is estimated using a two part model, where the second parts are generalized linear models of the level of expenditures among those with expenditures.  For Medicaid, adults enrolled in Medicaid for the entire year, and who are not eligible due to disability or through pathways with limited benefits are the estimation sample (N=3,374).  Regressions control for health status, attitudes, health behaviors, socioeconomic and geographic characteristics, and year fixed effects. 

Half of adults with MAGIs between 100% and 138% of poverty in states not expanding Medicaid are uninsured.  The uninsured not offered employment-related insurance are likely have lower out-of-pocket spending if their states expand Medicaid, even though the marketplaces offer generous benefits to low-income consumers. Compared with silver plans with subsidized cost sharing, expanding Medicaid would dramatically reduce the risk of spending more 10% of income on care and premiums.  Families with smokers would benefit considerably from expanded Medicaid, especially because they must pay the tobacco user surcharge in the marketplaces.