Private Health Care Spending and Medicaid Expansion: Evidence for Wisconsin

Gwyn Pauley and Matt Wiswall

Executive Summary:

This report estimates the costs and savings of the proposed Medicaid expansion in Wisconsin. First, we use data on health spending and insurance coverage to provide new estimates of the potential costs and savings of the Medicaid expansion in Wisconsin. We show that the Medicaid expansion could save nearly $100 million annually because of a reduction in uncompensated care costs, and that these savings exceed the costs to private insurers. Second, we re-evaluate the recent Flanders and Williams report (Flanders and Williams, 2019). Their analysis deviates from standard econometric practice in two key dimensions: failing to control for long-term time trends in health care costs and failing to adjust their expenditure data for inflation. Making either change to their analysis, we show that their results do not hold up, and controlling for state level trends and inflation shows a savings, not a cost, from the Medicaid expansion. We similarly find that their analysis of ER visits does not hold up after controlling for time trends.

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