With New Marketplaces Created by the Affordable Care Act, is it Still Less Expensive to Serve Low-Income People in Medicaid Than in Private Coverage?

Medicaid beneficiaries use more care, but marketplace enrollees generally have higher spending, presenting challenges for policymakers responsible for health policy.

The Issue

People who obtain insurance through Affordable Care Act (ACA) marketplaces receive significantly less care in hospital emergency rooms and inpatient settings than Medicaid enrollees. Marketplace enrollees, however, have higher total spending for physician and hospital outpatient visits and emergency room services than Medicaid enrollees, a result of their higher expenditures per visit. This presents challenges for determining the most cost-effective way to cover low-income individuals.

Key Findings

• Medicaid enrollees are significantly more likely to have an ER visit than those with marketplace coverage (23.0 versus 10.3 percent) but are less likely to have a hospital outpatient/physician visit (67.8 versus 72.1 percent).
• Marketplace enrollees’ expenditures per unit of care consumed are significantly higher than those of Medicaid enrollees for hospital outpatient/physician services ($522 versus $306) and ER visits ($2,445 versus $844).

Conclusion

These findings have implications for the ongoing debate over approaches for expanding coverage, particularly within states seeking waivers to adopt partial Medicaid expansions. Although researchers could not definitively conclude that total health care expenditures for Medicaid enrollees were less than for marketplace enrollees, the findings may help policymakers better understand how health care expenditures inform the total cost of health care. For example, relying more on the ACA marketplace to expand health insurance coverage could increase total expenditures, given marketplace enrollees’ higher per capita spending across certain services.

Policymakers also need to take other factors into account, such as administrative costs, cost-sharing, and network quality, to know whether expanding Medicaid or marketplace plans is more desirable.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.