Comparing Public & Private Insurance: Implications for Utilization, Costs, and Quality

Numerous studies over the past decade have provided insights into the effects of health insurance on utilization, costs, and quality. Most studies have examined Medicaid, through the Oregon Experiment and evaluations of the Affordable Care Act (ACA) Medicaid expansion. Meanwhile, there has been little rigorous evidence on the relative effects of different types of health insurance, including public versus private coverage.

After the 2018 election, several states appear poised to expand Medicaid, while other states are considering partial expansions in order to maintain a larger role for private insurance. Meanwhile, several 2020 Presidential candidates have proposed replacing private insurance with a single public payer model. In this context, understanding the tradeoffs between these coverage types is critical. We use a regression discontinuity design (RD) and a unique dataset combining income information and all-payer claims to compare public vs. private insurance coverage.

Merging income data from Colorado’s Medicaid and Marketplace agencies with the state’s All Payer Claims Database from 2014, we examined utilization, out-of-pocket spending, and total costs using RD methods to analyze the eligibility discontinuity that occurs at 138% of FPL. Our sample contained non-pregnant individuals ages 19-64, with incomes between 75% and 400% of FPL (N= 253,529).

Our findings are threefold. First, income below the Medicaid eligibility threshold led to roughly 7 months of additional Medicaid coverage per year and 7 fewer months of Marketplace coverage, suggesting the RD design by income had a strong first stage effect on coverage type.

Second, utilization patterns differed significantly. The RD estimates indicate that those eligible for Medicaid were 11 percentage-points more likely to visit the Emergency Department each year (Medicaid mean 28%) than those eligible for Marketplace coverage, but were 9 percentage-points less likely to have an outpatient visit (Medicaid mean 59%). Medicaid resulted in 0.37 additional ED visits per person (Medicaid mean 0.97) and 0.32 fewer outpatient visits per year (Medicaid mean 2.39). We found no significant differences in utilization of prescription drugs or hospitalization rates, including hospitalizations for ambulatory-care sensitive conditions.

Third, costs were significantly higher in Marketplace coverage. Annual spending per person was $1226 higher in Marketplace coverage, a 73% increase compared to the Medicaid mean ($1685). After standardizing prices to Medicaid rates, costs were similar in the two groups, suggesting that price differentials were responsible for these cost differences. Out-of-pocket spending (not including premiums) was even more disparate. Marketplace beneficiaries spent $147 more on average than Medicaid enrollees, more than a seven-fold increase compared to the Medicaid mean ($19). Results were robust in parametric and local linear models, and using variable bandwidths.

Overall, our results indicate that there are meaningful differences in the health care experiences of low-income adults in Medicaid vs. Marketplace coverage. Higher ED and lower office visit rates in Medicaid may reflect greater difficulty in accessing outpatient providers and/or lower cost-sharing barriers to ED care in Medicaid than private coverage. Meanwhile, Medicaid coverage is substantially less costly to beneficiaries and society. These results have important implications for policymakers considering alternative approaches to coverage expansion.