The Impact of Medicaid Expansion

Will Flanders and Noah Williams

Executive Summary:

Medicaid expansion in Wisconsin will be a major topic of debate in this year. Currently in Wisconsin, those earning up to 100% of the federal poverty limit are eligible for Medicaid. Medicaid expansion would increase eligibility to 138% of the poverty limit, while increasing the reimbursement rate for Medicaid expenses from the federal government.

Wisconsin is one of 14 states that has not participated in Medicaid expansion, and Governor Tony Evers is likely to make the issue a focal point of his first budget. In order to evaluate the utility of Medicaid expansion, it is vital that policymakers have information about the likely effects of such a decision. Fortunately for Wisconsin, we now have access to several years of data to compare expansion state with non-expanders.

In addition to reviewing existing research, this paper takes advantage of 15 years of data from around all fifty states plus the District of Columbia. We examine the relationship between Medicaid expansion and two variables: private sector healthcare costs and emergency room (ER) visits. Using regression analysis with this panel data, we found the following key results:

  • In states that took expansion, private sector healthcare costs increased by $177 per person. While healthcare costs in all states increased in the time frame of analysis, costs increased more in states that participated in Medicaid expansion. This would move Wisconsin from the 7th highest private sector healthcare costs to 4th.
  • A cost-benefit analysis suggests that Medicaid expansion would cost Wisconsin approximately $600 million per year.
    Healthcare cost increases are estimated at $1.145 billion while fiscal benefits to the state are $545 million. This works out to a net cost to the state of over $600 million per year. Note that this does not account for any positive or negative health effects of the expansion.
  • In states that took expansion, ER visits increased by about 9 per 1,000 residents. Contrary to rhetoric suggesting that access to Medicaid would increase the use of preventative care while reducing expensive care like ER visits, our results suggest a statistically significant increase in the opposite direction.

These results suggest that Wisconsin should consider other, market-based alternatives to expansion that can reduce costs and help low-income Wisconsinites without these negative effects. This could include increasing access to Short Term Limited Duration plans, and making direct primary care—that eliminates the insurance middle man—more readily accessible.

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