CBO describes a new framework for allocating the budgetary effects of changes to Medicaid policies to households. The framework accounts for changes in income for Medicaid enrollees, health care providers, and private insurers.
Summary
By Justin Falk.
Most of CBO's existing work on estimating the distributional effects of changes to health care programs assigns government subsidies per enrollee to the household of the enrollee. This working paper describes a framework for allocating changes in subsidies resulting from changes to Medicaid policy that accounts for changes in income for health care providers and private insurers in addition to changes in health care use and costs for Medicaid enrollees. That framework can result in different distributional effects because most enrollees are in the bottom quarter of the income distribution whereas amounts paid to providers and insurers are allocated to the upper portion of the income distribution. Applying that framework to a policy that would expand eligibility would result in a small share of the increase in subsidies from more Medicaid enrollment's being allocated to health care providers because although providers would tend to be paid at higher rates for the uninsured people who gain Medicaid, they would be paid at lower rates for the new Medicaid enrollees who had commercial insurance. Thus, the expansion would have little effect, on net, on the resources of households higher in the income distribution. In contrast, most of the increase in subsidies from a policy that would increase the rates that Medicaid pays to providers would be allocated to providers. Thus, the majority of the increase in Medicaid spending resulting from that policy change would be allocated to households that are higher in the income distribution than the households of Medicaid enrollees. In ongoing work, CBO is extending this framework to analyze policy options that would change marketplace subsidies, subsidies for employment-based coverage, and Medicare.