Medicaid Expansion: Will it achieve its promise?

December 6, 2010

Many analyses of the impact of health reform focus on the large increase in expected Medicaid enrollment.  Indeed, our own analysis of potential Medicaid enrollment in Michigan showed as many as 452,000 people could be enrolled come 2014 (link to Cover Michigan) who are not enrolled today. Kaiser’s numbers were slightly higher, at 590,000 potentially new Medicaid enrollees, and more recent Census data suggest the numbers could be even higher. Whatever the actual number, all analysts expect a significant increase in Medicaid enrollment in Michigan over the 1.9 million enrolled in 2010.  Providers, states, businesses and community groups are all planning based on these expected increases in Medicaid enrollment.

But are these numbers real? And, does it truly make sense to plan on this basis? The November 24 New England Journal of Medicine had an important article on this topic.  Their analysis highlights how important it is to understand what’s behind the numbers as we think about what must happen in 2014 for these projections to become a reality – actual people enrolled in Medicaid.

A significant percentage of individuals identified in our study and counted as part of the expected increase in Medicaid enrollment in 2014 are not actually those who will be newly eligible for Medicaid in 2014.  Rather, they are eligible for Medicaid today and not enrolled. In our report, of the 452,000 who are not now but could be enrolled in Medicaid come 2014, 165,000 are already eligible. That means that almost 16 percent of individuals who are uninsured today are already eligible for but not enrolled in Medicaid.

Why is that? It’s a combination of reasons.

In some cases, individuals don’t enroll in Medicaid because they don’t want the stigma of being in a public program.  In other cases, it has to do with the difficulty inherent in the enrollment process, especially in Michigan. Staff at the Department of Human Services are overwhelmed with applications and their numbers are too few to handle even current demand.  The Department recently migrated to a new information system that should be helpful in the future but is not right now. And, many fast track options adopted by other states have not been adopted here in Michigan. So, the enrollment process is unpleasant and difficult for many.

The question is: will these issues be fixed with health care reform? Is there any reason to believe that the Medicaid take-up rate will be higher post 2014 than it is today?  The answer is that it could be, but that depends on a number of factors.  These include both changes that are inherent in the health care law and those that relate to the way the state implements the Medicaid expansion.

There are many incentives in health care reform that are different from today’s incentives and could encourage more enrollment in Medicaid. The most significant is the mandate requiring individuals to purchase health insurance. This mandate (assuming it withstands court and political challenges) is a significant departure from the current health care environment.  While the mandate can significantly change the environment, enforcement will be an issue.  First, those who don’t have any reportable income are exempt from the mandate. And second, it isn’t clear there will be adequate funding to enforce it as intended, or that this low income population would be the focus of enforcement.  So, this component of health reform may have less impact than some think.

The state has choices in Medicaid enrollment today.  It could have adopted many of the fast track options that were implemented by Wisconsin and other states. So far, it has not adopted all that it could. Going forward, the state could simplify Medicaid enrollment and engage in aggressive outreach to those who are eligible but not enrolled.

But even with the much higher match for the newly eligible population, the state will still need to find matching funds for almost 300,000 of those newly eligible and a higher match rate for the 165,000 who are eligible for the existing program but not enrolled. Will the state be aggressive as it could be in its enrollment efforts given the state budget challenges? We hope that 2014 will be a better economic year for Michigan than 2010 has been, but Medicaid already represents 22 percent of the state budget and its costs will continue to go up between now and then.  Will the revenue picture be such that the state will want to try and get everyone eligible enrolled?

Predictions are hard to make and our choices about the future are important.  For those counting on another half million individuals moving out of the ranks of the uninsured and into Medicaid, the decisions we make as a state over the next several years will be vitally important.