What is Medicaid crowd out?
February 21, 2013 Leave a comment
Crowd out is when the presence of public insurance (like Medicaid) causes someone with private insurance (such as that provided by an employer, or more rarely individually purchased) to drop private in lieu of public coverage.
Senator Berger has said that 400,000 (80%) of the estimated 500,000 persons who would be newly insured by Medicaid if the state undertook the expansion under the ACA would be dropping private coverage for Medicaid, an estimate that is not backed up by any reasonable assessment of the existing evidence (here is author of the study Sen. Berger cites saying he gets it wrong; today’s N & O has more). It is hard to precisely estimate the crowd out effect of expanding Medicaid, but there certainly will be some. More plausible estimates for N.C. are likely in the 5% to 15% range, but it is difficult to precisely estimate the impact of such a big chance in Medicaid eligibility.
I want to try and clarify what the question is when discussing crowd out. It is how many people represented by the gray area below, now have private health insurance, and who after the Medicaid expansion will instead be covered by Medicaid? (N.C. IOM slides; below is #5):
- For childless adults, that is how many people with incomes of between $0 and $15,415 today have private insurance, and who will drop this coverage and take up Medicaid after the expansion?
- For working parents, lets say two parents and 2 kids, it is how many such families of 4 with incomes between $15,587 and $31,809 will drop their current private health insurance for Medicaid?
- For non-working parents, now lets say single parent with 2 kids, how many such families of 4 with incomes between $10,274 and $26,344 will drop their current private health insurance for Medicaid?
Using the family of 4 example and Duke University’s health insurance, if one parent was employed at Duke and they picked the family coverage in the Duke plan my family chooses, they would have to spend $414 per month in premiums, or between one-third (if salary was $15,587) and one-sixth (if salary was $31,809) of their gross salary, before they even paid any of the deductibles and co-pays for actually using care (we spent around $3,100 last year per a quick tax document look).
How many such people have private insurance now and would later be covered by Medicaid? The punch line is that there aren’t going to be that many people in this category because there aren’t that many who can afford/would choose to pay that much of their income for health insurance. That is why the ACA uses Medicaid to provide coverage for persons up to 138% of poverty.
As always, for people opposed to the Medicaid expansion, especially our elected leaders: what is your alternative? Do you have a better plan?