United States GAO Gqteral Accounting Offke Washington, D.C. 20648 Health, Education and Haman Services Division B-277367 July 18, 1997 The Honorable Thomas J. Bailey, Jr. Chairman, Committee on Commerce House of Representatives Subject: Medicaid: Proiected Cost of Exoanding Coverage for Children Dear Mr. Chairman: This letter responds to your January 3, 1997, request for an estimate of the cost of expanding Medicaid coverage to include all children who are under age 18 and living in families with incomes below 300 percent of the federal poverty level (FPL). You also asked for information on the number of additional children who would be covered under an expanded program and Medicaid spending per child on a state-by-state basis. In summary, we estimated there are 32.3 million children under age 18 living in families with incomes below 300 percent of FPL and currently not enrolled in Medicaid. Using estimates of the proportion of potentially eligible children who would actually enroll based on studies of past program expansions, we cakzulated that between 6 million and 9.6 million additional children might enroll in the program if it was expanded, at an additional cost ranging from $6.8 billion to $10.6 billion per year. The cost calculation was based on fiscal year 1996 Medicaid spending as reported by the Health Care Financing Admin.&ration (HCFA). As agreed with your office, we are not reporting this information by state, because we are uncertain about the accuracy of state-level data. Instead, the cost calculations are based on national average costs by age group. First, to estimate the number of eligible children, we used data from the Current Population Surveys (CPS) to tabulate the number of children who were under 18, living at below 300 percent of FPL, and not enrolled in Medicaid. Because CPS counts are based on samples, we used a 3-year average, from 1994 to 1996, to improve the reliability of the estimates. This approach yielded an estimate, of 32.3 million eligible children. GAOIHEHS-97-170R Medicaid Coverage for Children B-277367 Studies of program expansions during the late 1980s and early 1990s concluded that children without private health insurance enrolled in Medicaid at rates ranging from 70 to 90 percent of those eligible.’ Prior studies concluded that children with private insurance enrobed at much lower rates: About haif continued their insurance but also enrolled in Medicaid, and up to 15 percent switched from private insurance to Medicaid.2 We excluded from our estimates the eligible children who continued their private insurance because Medicaid is the payer of last resort. We assumed the costs for children jointly enrolled were small enough to be ignored. Moreover, HCFA does not collect the cost data necessary to include these children in our analysis. Since previous research provides a range of enrollment rate estimates, we made enrollment calculations under three possible scenarios. The &st scenario assumed that the uninsured would enroll at a rate of 70 percent and that the insured would not enroil in Medicaid. The second scenario assumed the uninsured would enroil at a go-percent rate and that the insured would not ‘See Lisa Dubay and Genevieve Kenney, Revisiting the Issues: The Effects of Medicaid Expansions on Insurance Coverage of Children (Washington, D.C.: The Urban Institute, Oct. 1995), p. 9. The authors estimated that 70 percent of the uninsured enrolled in the program during past expansions of eligibility. See also David M. Cutler and Jonathan Gruber, “Does Public Insurance Crowd Out Private Insurance?” Quarterlv Journal of Economics (May 1996), p. 407. These authors estimated that 90 percent would enroll. %e following two studies estimated that none of the privately insured dropped their insurance and enrolled in Medicaid: Esel Y. Yazici, “Medicaid Expansions and the Crowding Out of Private Insurance,” presented at the 18th Annual Research Conference of the Association for Public Policy Analysis and Management, Pittsburgh, Penn., Nov. 2, 1996, p. 21, and Lara Shore-Sheppard, “The Effect of Expanding Medicaid Eligibility on the Distribution of Children’s Health Insurance Coverage,” prepared for the CorneIUPrinceton conference on “Reforming Social Insurance Programs,” Sept. 1996, p. 18. David M. Cutler and Jonathan Gruber, “Peer Review: Medicaid and Private Insurance: Evidence and Implications,” Health Affzirs (Jan./Feb. 1997), p. 198, found that 15 percent of the insured dropped their insurance and eNO&d. Finally, Dubay and Kenney, Revisiting the Issues: The Effects of Medicaid Fxnansions on Insurance Coverage of Children, estimated that about half the children covered by private insurance kept their private insurance and also enrolled in Medicaid when they became eligible. 2 GAOEJEHS-97-170R Medicaid Coverage for Children B-277367 enroll. The last scenario assumed that the uninsured would enr0I.I at a 70- percent rate and the insured at 15 percent? To estimate the cost of this expansion of Medicaid eligibility, we obtained information on fiscal year 1995 spending per child from HCFA. Spending per child ranged from $875 for children aged 1 to 5 to $2,176 for children under age 1 . We calculated the cost increase for four age groups: under age 1, ages 1 to 5, ages 6 to 14, and ages 15 to 17.4 We multiplied fiscal year 1995 spending per child by the estimated increase in enroIlment.6 The enrollment rate assumptions and the associated estimates of increased enrollment and cost are summarized in table 1. Scenario 1 represents the lowest cost estimate, $6.8 billion, based on enrollment rates of 70 percent for the uninsured and 0 percent for the insured. Alternatively, scenario 3 yields the highest cost estimate, $10.6 bibion, based on enrollment rates of 70 percent for the uninsured and 15 percent for the insured. ?I’he estimate of a go-percent participation rate was derived from the assumption that aU enroIIees came from the pool of uninsured children. Therefore, the only scenario we developed that assumed a go-percent participation rate also assumed none of the insured would enroll in the program. 4Because HCFA does not collect data on Medicaid spending for 15 to 17-year- old children, we used a proxy for this age group: the spending per child for 15 to 20-year-old children ‘See table I.1 in the enclosure for CPS counts, table I.2 for expected enrollment increases by age group, table I.3 for spending per child by age group, and table I.4 for cost calculations by age group. 3 GAOEJEHS-97-170R Medicaid Coverage for Children B-277367 Table 1: Scenarios for Enrollment Rate and Estimated Increases in Enrollment and Costs Under Medicaid Exoansion. Fiscal Year 1995 ?l?hepercentage increase was calculated using the number of Medicaid enrollees obtained from CPS. ----- If you have any questions regarding this letter or if we can be of further assistance, please call me at (202) 512-7114 or Jerry Fastrup, Assistant Director, at (202) 512-7211. Sincerely yours, William J. Scanlon Director, Health Policy and Financing Issues Enclosure 4 GAOIHEHS-97-170R Medicaid Coverage for Children ENCLOSURE ENCLOSURE ENROLLMENT AND COST ESTIMATES BY AGE COHORT This enclosure provides detailed information on our calculations by age group. Table 1.1 shows the estimated numbers of eligible children by age group. Table I.2 shows the estimated increased enrollment for the three scenarios by age group. Table I.3 shows the cost per child. Table I.4 shows additional cost calculations by age group. Table 1.1: Three-Year Average Estimates of Number of Children Who Would Be Eligible Under Medicaid Exmnsion. bv Age GrouD In millions Source: CPS 1994-96. Table I. 2: .Estimates of Increased Enrollment Under Three Enroknent Rate Scenarios. bv Age Gram GAOLKEHS-97-170R Medicaid Coverage for Children ENCLOSURE ENCLOSURE Table 1.3: Medicaid Cost uer Enrollee. bv Age Grow, Fiscal Year 1995 Agegroups Under 1 Aged 1 to 5 Aged 6 to 14 Aged 15 to 17 Aged 15 to 20 Cost per child $2,176 $875 $881 $1,846 $1,170 Table 1.4: Additional Cost of Expanditx Medicaid Coverage. by Age &our, Ir 1 Enrollment rates 1 Additional cost (in millions) 1 (s _ cenario 1 _ _~~-~~- (percentages) Insured ~~ _-~ - ~~ IUninsured Under atfe 1 bed 0 7c I 1 to 5ked 3720 - $1,395 - I 6 to 14 ked 15 to 171 $2,601 - I ToWi $2,055 $6,771 2 0 90 926 1,793 3,344 w43 8,706 3 151 70 1.089 2.285, 4.230 3,029 10,634" “Because of rounding, dollar amounts do not equal total. (101534) 6 GAO/HEHS-97-170R Medicaid Coverage for Children Ordering Information The first copy of each GAO report and testimony is free. Additional copies are $2 each. 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Medicaid: Projected Cost of Expanding Coverage for Children
Published by the Government Accountability Office on 1997-07-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)