The Affordability in Affordable Care Act: What are the Effects of Kentucky's Medicaid Expansion on Out of Pocket Medical Spending?

The recent Medicaid expansions under the Affordable Care Act are generating substantial reductions in state uninsured rates and increasing access to care. Several states expanded their Medicaid eligibility criteria to include enrollees up to 138 percent of the federal poverty level (FPL) on January 1, 2014 with some states expanding earlier. Early findings suggests over 400,000 people gained insurance coverage due to Kentucky’s Medicaid expansion and while gaining insurance coverage is one important determinant in access to care, many could still be burdened by other financial costs associated with health care utilization. Because of the timeliness of this important policy issue, we exploit the timing of Kentucky’s Medicaid eligibility expansion, on January 1, 2014, to investigate the effect on out of pocket medical spending by those who would have otherwise fallen into the “coverage gap.” The coverage gap generally refers to the traditionally uninsured population too “rich” to qualify for traditional Medicaid yet too poor to purchase insurance coverage through the individual health insurance marketplace. Many falling in this gap are likely to be burdened by higher out of pocket medical expenses, and expanding Medicaid may be a policy lever that could help to alleviate elevated medical costs and reduce the risk of excessive medical debt for some. Our approach uses the Current Population Survey’s Annual Social and Economic Supplement for 2010-2015 and combines a difference-in-difference-in-difference (i.e. triple difference) based approach with a two-part regression model to capture the expansion’s effect on changes in 1) experiencing any out of pocket medical spending, 2) amount of out of pocket spending, and 3) fraction of medical spending relative to household income. The extent that raising the Medicaid eligibility limit can offer possible protections against excessive medical debt associated with health care utilization is a timely policy question. The findings of this study will help to determine whether people in the coverage gap benefitted from the policy, as well as the magnitude of the benefits.