Drug Costs, Healthcare Spending Grow Over Time for Medicaid Expansion Populations

Healthcare spending for the Medicaid expansion population increased steadily over time for beneficiaries who remained enrolled in Medicaid, according to a new analysis from Avalere Health. The analysis also found that spending for prescription drugs increased over the study period, with pharmacy costs (excluding prescription drug claims for hepatitis C treatments) almost doubling over the 2.5-year time period during which the cohort was tracked—a likely indication that the previously uninsured population may have had previously untreated conditions, and that gaining access to health insurance helped to provide needed care to these enrollees. The analysis concludes that utilization and costs among Medicaid expansion enrollees will continue to increase, particularly for non-acute-care services, the longer members remain covered.

“Contrary to some expectations that Medicaid expansion enrollees would be relatively healthy, beneficiaries who have remained on the program have increasing healthcare needs, likely due to previously unidentified or untreated conditions,” said report coauthor Caroline Pearson, senior vice president at Avalere.

Across plans, states, and enrollment groups, healthier, younger, lower-cost enrollees appear more likely to drop their enrollment in Medicaid after a shorter period of time, the report found: about half of enrollees dropped coverage within 18 months. There are many factors that could be involved in disenrollment from a Medicaid managed care organization (MCO) plan: enrollees could gain access to employer-sponsored insurance, their income could increase and make them ineligible for Medicaid, or individuals could fail to meet a state’s administrative requirement for eligibility redeterminations.

Avalere’s analysis was performed on claims data from January 2014 through December 2016 from 3 Medicaid MCOs offering coverage in states that expanded Medicaid on January 1, 2014 after the Affordable Care Act (ACA) provided states with the option of extending Medicaid eligibility. Many of these new enrollees were previously uninsured.

The analysis found:

• The share of spending for inpatient hospital care and emergency department visits decreased dramatically over time, whereas spending for chronic care services, including prescription drugs, increased over the study period. In early 2014, enrollees’ inpatient spending initially made up the largest share of costs, but was surpassed by prescription drug spending by month 8 of enrollment, reflecting a shift away from acute health needs to chronic disease treatment. Demographic shifts in enrollment—those who remain enrolled for longer are older and less healthy—may also play a part in higher prescription drug spending.
• Across enrollment groups, per-member per-month (PMPM) spending on prescription drugs increased with enrollment duration.
• After 8 months of enrollment, prescription drug costs surpassed inpatient costs, growing to just under 30% of total claims costs by 30 months. There are several possible explanations for this pattern: enrollees may have received more outpatient and chronic care management as they established relationships with healthcare providers (increasing medication use but reducing complications requiring an emergency department visit or inpatient admission), or it may reflect higher underlying cost trends in pharmacy as compared to other medical services.
• Compared with the first 6 months of coverage, average PMPM prescription drug claims costs were 58% higher in months 13 to 18 of enrollment and 89% higher during months 25 to 30 of enrollment for the group that enrolled in the first half of 2014.

Avalere’s report, “Profile of the Medicaid Expansion Population: Demographics, Enrollment, and Utilization,” was funded by the Anthem Public Policy Institute.