Losing Public Insurance and Mental Healthcare and Mental Illness: Evidence from a Large-scale Medicaid Disenrollment

Mental illnesses are prevalent. In 2015 24.4% of adults 18 years and older residing in the United States suffered from a mental illness. These illnesses lead to morbidity and mortality, employment problems, and relationship difficulties for the affected individual. In addition to internal costs, mental illnesses impose negative externalities on broader society. Indeed, each year mental illnesses cost the U.S. economy $504B in healthcare expenditures, disability payments, and a less productive work force. While mental illnesses impose large costs on both affected individuals and society, these illnesses can be effectively treated with appropriate healthcare services. However, most individuals who would benefit from mental health treatment do not receive it; with inability to pay for treatment being a critical barrier.

In this study we provide the first evidence on the effect of losing public insurance on mental healthcare utilization and mental illness. We exploit plausibly exogenous variation in insurance coverage generated by one of the largest disenrollments in the history of Medicaid: a 2005 reform in Tennessee that lead to 190,000 enrollees, 10% of the enrollee population, losing insurance (‘TennCare’). To study reform effects, we employ rich survey data from the National Survey of Drug Use and Health, administrative data on hospitalizations, and administrative data on suicides over the period 2002-2010. We estimate differences-in-differences regressions with geographically similar U.S. states serving as a counterfactual for Tennessee.

A contribution of our study is that we are able to study the effect of losing, as opposed to gaining, insurance. The effects of insurance gains and losses are not likely symmetric. The literature has focused primarily on estimating the effect of gains due to available sources of exogenous variation in insurance coverage. Thus, there is a paucity of research on the effects of losses, in particular there is no evidence within the context of mental health.

This scarcity of evidence is particularly troubling given current healthcare policy debates in the U.S. Although the Affordable Care Act (ACA) has reduced uninsurance to a historically low rate of 8.8%, increased access to valuable healthcare services, and improved both health outcomes and financial security, the fate of this Act is uncertain. Moreover, proposed replacement regulations will result in substantial insurance losses, stemming in particular from large-scale reductions in Medicaid enrollment. The population of enrollees that lost TennCare coverage share similar demographics with the population that gained Medicaid eligibility under the ACA and that is at most risk of losing coverage in proposed replacement healthcare plans: low-income childless, non-disabled adults and uninsurable adults. Therefore, TennCare can provide important insight on proposed changes to Medicaid.

Several findings emerge from our analysis. First, post-disenrollment, mental healthcare use declines overall and unmet need for mental healthcare increases. Second, mental healthcare shifts to more expensive settings. Third, mental healthcare financing is more likely to be borne by patients and hospitals in the form of uncompensated care post-disenrollment. Fourth, mental illness, proxied by the suicide rate, worsens. Overall, losing insurance alters the location and financing of mental healthcare, and worsens mental illness.