June 27, 2013: The Affordable Care Act (ACA) is likely to lead to a substantial increase in Medicaid participation among people who are currently eligible for the program but not enrolled. This is the key finding of a new Robert Wood Johnson Foundation-funded study by SHADAC researchers Julie Sonier, Michel Boudreaux, and Lynn Blewett, published as a Web First article in Health Affairs on June 26, 2013.
One impact of this “welcome-mat” effect – sometimes also called the “woodwork” effect – will be higher Medicaid caseloads and spending even in states that do not expand Medicaid as called for by the ACA.
Why States Are Concerned
Some type of Medicaid welcome-mat effect has long been widely anticipated, but there has been limited research evidence to date to help estimate its size. This issue is a particular concern for states, because although the ACA funds 100 percent of the costs associated with newly-eligible Medicaid enrollees from 2014 through 2016 (eventually phasing down to 90 percent), there will be no enhanced federal match rate for Medicaid enrollees who would have qualified under previous Medicaid rules.
Although there will be increased costs for states due to the welcome-mat effect, the study authors point out that states also incur costs today when uninsured people defer medical services until they have a potentially preventable and even costly health event that causes them to enroll in Medicaid.
Study Results
Massachusetts was used as a case study for this analysis because it is the only state that has implemented reforms of a scale and scope similar to those of the Affordable Care Act. Looking at the Massachusetts 2006 health reform and controlling for other factors that influence Medicaid participation rates, the investigators found that Medicaid participation among eligible low-income parents increased by 19.4 percentage points more in Massachusetts than in a group of control states.
Implications
The presence of an individual requirement to obtain health insurance and health insurance exchanges providing subsidies to purchase private coverage in all states means there is likely to be some Medicaid welcome-mat effect in all states, even those that choose not to implement the Medicaid expansion or administer their own health insurance exchange. In addition, the implementation of streamlined enrollment determination processes in all states is likely to increase participation rates further.
While all states are likely to see some welcome-mat effect from the ACA, the size of the welcome-mat effect is likely to vary across states. Because in many states the Medicaid participation rate has more “room to improve” than in Massachusetts, there is potential that the welcome mat effect could be even larger in some states than that seen in Massachusetts. On the other hand, limited outreach and enrollment efforts in states that choose not to implement the Medicaid expansion or administer their own health insurance exchange could result in a lower Medicaid welcome-mat effect in those states.