Price Sensitivity to Premiums in Medicaid: Evidence from Discontinuous Program Rules

Background: There is widespread recognition among health policy scholars that medical services vary in clinical benefit to the patient, and that an efficient health care system should seek to encourage high-value and discourage the use of low-value medical services. Michigan state legislators crafted the state’s Medicaid expansion program under the Affordable Care Act in this context, and sought a federal waiver to include new cost-sharing features, such as copays for common medical services, including physician office visits, dental visits, medications, and outpatient hospital clinic visits. Policymakers also sought to encourage beneficiaries to engage in healthy behaviors. Thus, many services considered beneficial to long-term health, such as high-value primary preventive screenings and services, or medications for treatment of specific chronic diseases, are exempt from cost-sharing requirements. While the use of such value-based cost-sharing to encourage or discourage specific clinical services has been studied in a commercial environment, it has not yet been examined in a Medicaid population. Because of differences in the population and the implementation of cost-sharing across markets (e.g. in Michigan’s Medicaid expansion program services cannot be denied for failure to pay), findings may not translate across insurance types. This study assesses whether the exemption of copays for some services resulted in increased use of these services compared with those services for which copays are more likely incurred.

Research Question: Do Medicaid enrollees demonstrate increased use of medical services that are exempt from copays compared with those services more likely associated with copays?

Methodology: We use administrative claims data from enrollees in Michigan’s Medicaid expansion program who have at least 18 months of continuous enrollment and who enrolled in the program at its inception in April 2014 up through March 2015. We include any utilization between April 2014 and September 2016. Operationally, there are no services for which all beneficiaries incur copays as there are a number of copay exemptions, including any services related to chronic disease (identified by diagnosis code or drug category) and being a part of an excluded population (e.g., pregnant women, enrollees age 19-20 years). We create a set of services for which there are no copays and a set for which there are often copays. Using a time series design, we compare utilization of no-copay and copay-likely services between the first 12 months of the program and subsequent months of enrollment, under the assumption that enrollees may learn to use those services for which there are no copays, and potentially limit their use services for which copays are likely. We control for age, gender, region, poverty level and enrollee financial obligation
Results: This project is part of a required independent evaluation related to Michigan’s 1115 waiver for this expansion demonstration. Per terms of the evaluation agreement, results are reviewed by officials at the Michigan Department of Health and Human Services before external release.

Conclusions: Conclusions will be based on data and available after results are reviewed by the state in early 2018.