By Sean Miskell
When we consider the effects of state decisions not to expand Medicaid, we rightfully focus much of our attention on those that are locked out of coverage. However, a new study by researchers at the Commonwealth Fund considers the experience of consumers above the poverty line that are eligible for subsidized Marketplace coverage in non-expansion states, particularly with regard to the financial protections that Marketplace plans offer. The study finds that consumers at this income level face greater expenses from premiums and out-of-pocket costs in Marketplace plans than they would under Medicaid.
For consumers with incomes below 150 percent of the federal poverty level, Medicaid prohibits premiums and caps total cost sharing charges at five percent of the consumer’s income. Though Marketplace plans also entail financial protections, the Commonwealth Fund finds that in practice they are less robust than what is available through Medicaid. For the income level considered here (by way of example, the study uses 110 percent of the federal poverty level, or $13,000 per year), premiums for the second lowest cost silver plan are capped at 2.03 percent of income. People at this income level are also eligible for cost sharing deductions that Marketplace plans can meet through different means, such as decreasing deductibles, copayments, and out-of-pocket limits.
To understand how the varying financial protections offered through Medicaid and the Marketplace operate in practice, the study considered the benefits, premiums, and cost-sharing in two silver Marketplace plans (sold in Virginia Beach, VA and Houston, TX) compared with traditional Medicaid. These examples indicate that traditional Medicaid provides greater protection against costs in each of these areas.
Regarding premiums, consumer at the income level examined by the study enrolled in Marketplace plans can expect to pay $22 per month compared with none in Medicaid. In terms of benefits, Marketplace plans must cover the ten essential benefits enumerated by the Affordable Care Act: ambulatory services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse; prescription drugs; rehabilitative and habilitative services; laboratory services; preventive and wellness services; and pediatric services. Medicaid entails the same covered benefits as well as others, including early and periodic screening, diagnostic, and treatment (up to age 21); free choice of family planning providers; nonemergency medical transportation, federally qualified health center and rural health clinic services; and any other treatments or services included in a state’s Medicaid plan.
But the study’s authors argue that the most important difference between Medicaid and Marketplace plans is the out-of-pocket limit. Medicaid’s limit is applied monthly or quarterly, so consumers pay their percentage share on a smaller portion of their annual income. For example, a consumer with an annual income of $13,000 that incurred a cost of $3,000 would be charged only $54 if their state applies the cap on a monthly basis or $163 if the state applies the cap quarterly. In comparison, a consumer with Marketplace coverage in Virginia Beach would pay $435 (which includes a $150 deductible and ten percent of the remaining cost) while a consumer in Houston would pay $300 (ten percent coinsurance). For consumers in the Marketplace, these costs would come on top of their monthly premiums. The authors also remind us that potential out-of-pocket costs in Marketplace plans are higher for people with greater health care needs.
Finally, the study also provides us with a cautionary reminder that not all newly eligible Medicaid enrollees enjoy the financial protections described in this discussion of ‘traditional’ Medicaid. Several states, including Arkansas, Indiana, Iowa, Michigan, Montana, and New Hampshire, have expanded Medicaid via Section 1115 waivers often erode the financial protections typically available under Medicaid by allowing premiums and other costs including contributions to health savings accounts. Regular Say Ahhh! readers are certainly familiar with the issues surrounding 1115 waivers, but the Commonwealth Fund study’s findings concerning the superior financial protections in Medicaid compared with Marketplace coverage provides important context for understanding why these waivers can undermine Medicaid’s financial protections.
