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$200 Billion Wouldn’t Provide Affordable Private Coverage for Medicaid Expansion Enrollees

Senate leaders are reportedly considering adding $200 billion to the Senate health bill to supplement private coverage for people who gained Medicaid coverage under the Affordable Care Act’s (ACA) Medicaid expansion and would lose it under their bill. But that would fall far short of the actual cost of providing affordable private coverage to those people, new Urban Institute estimates with state-by-state data show. In fact, Urban concludes that $200 billion would cover only a little more than two years of the cost, which would equal at least $76 billion just for 2022.

The Trump Administration is pushing this supplemental coverage as part of its last-minute effort to win the votes of Republican senators from Medicaid expansion states. On its face, as we’ve explained, $200 billion wouldn’t come close to offsetting the bill’s $1.2 trillion in cuts in Medicaid and subsidies for marketplace coverage. It wouldn’t even come close to filling the gap left by repealing the Medicaid expansion.

The Urban analysis confirms this simple arithmetic. Urban finds that, under the current version of the Senate bill, 90 percent of those losing Medicaid expansion coverage would become uninsured. That’s consistent with a Congressional Budget Office (CBO) finding that few people losing Medicaid coverage under the bill would enroll in private coverage because of the huge deductibles and other out-of-pocket costs they’d face.

Fixing this would have big costs:

  • Providing premium tax credits to cover those who’d otherwise become uninsured in private health coverage would cost $17.4 billion.
  • Providing subsidies to offset the deductibles and other cost-sharing charges that all poor and near-poor individuals would otherwise face under the Senate bill would cost $33.6 billion.
  • Providing subsidies to offset the premium contributions (amounting to 2 or 2.5 percent of household income) for former expansion enrollees would cost $6.1 billion. Even if this premium “wrap” went only to people with incomes under the poverty line, it would still cost $5.1 billion.
  • Paying the higher claims costs that insurers would incur for this group of individuals, who would use more health care services than others, would cost $19 billion. Urban assumes the federal government would have to pay these costs to keep insurers from experiencing unsustainable losses or taking steps not to enroll these individuals.

These increased costs would total $76.1 billion just for 2022 and would rise thereafter.

Moreover, that estimate assumes that states that expanded Medicaid for adults before the ACA (Arizona, Delaware, Hawaii, Massachusetts, New York, and Vermont) would continue that coverage at their own expense, even though doing so is optional. If not, the additional cost of providing affordable coverage to Medicaid expansion enrollees in these states (compared to the underlying Senate bill) would rise to $100.7 billion in 2022 alone.

Even with supplemental coverage, former Medicaid enrollees could still face the loss of critical health care services — another difference between Medicaid and private coverage under the Senate bill, which the Urban analysis didn’t address. Private plans wouldn’t cover services such as non-emergency medical transportation and care management, which many states provide to Medicaid beneficiaries with chronic conditions such as diabetes, substance use disorders, or mental illness.

Moreover, Urban’s analysis assumes that supplemental coverage would go only to former expansion enrollees, not to poor- and near-poor people in non-expansion states or to low-income people with incomes above the expansion cutoff of 138 percent of the poverty level. This would create a huge income “cliff” where people with incomes just over 138 percent of poverty would face deductibles of $13,000 in 2026, CBO estimates. There’s no policy justification for these gaps. But addressing them would increase costs even further beyond what $200 billion could buy.