Insight

The Woodwork Effect: Costing Non-Expansion States Up to $700 Million in 2014

Though the open enrollment period for the health insurance exchanges has come to a close, the total number of newly enrolled Medicaid beneficiaries is still climbing for 2014. Many questions have been raised regarding the number of newly enrolled individuals as a result of the Affordable Care Act (ACA). However, the ability to discern which individuals were previously eligible or are newly eligible is still a challenge. Data is not yet available for the states that have expanded their Medicaid programs, as many system wide hurdles exist in separating the enrollee determinations based on expansion vs. non-expansion eligibility. Also, Medicaid does not have an open enrollment period, and instead offers on-going enrollment throughout the year. In states that are not expanding Medicaid, some of the numbers are more transparent. Individuals joining Medicaid rolls in these states are part of what is known as the “woodwork effect:” previously eligible individuals that are coming out of the “woodwork” to apply for coverage. The addition of these enrollees in states that chose not to expand Medicaid will prove problematic for state budgets, causing an unplanned increase in Medicaid spending. 

The Congressional Budget Office addressed this phenomenon, stating that individuals who were eligible for Medicaid prior to the ACA, but never enrolled, would be drawn to sign up because of the individual mandate or because of increased publicity surrounding health care reform. This effect has been seen in other large scale expansions of public entitlement programs. For example, during the Massachusetts health reform effort in 2006, Medicaid enrollment increased by 16.3 percent among parents already eligible for the program.[1] Even though these individuals were already eligible for Medicaid, they did not participate in the program until a health care overhaul was implemented in the state. Just as in Massachusetts, early ACA estimates show an increase in the pre-ACA eligible population of roughly 6 percent.[2]

Avalere Health recently estimated that, if enrollment rates continue at their current speed, states will see an increase of 3.7 million beneficiaries nationwide enrolled as a result of the ACA by the end of March.[3] According to the Centers for Medicaid and CHIP (CMCS) February enrollment report, Medicaid enrollment in states that did not expand their eligibility has increased by 380,000 individuals since October.[4] Unlike newly eligible enrollees in states expanding Medicaid, these additional beneficiaries come without the increased federal matching rate, and thus stress state budgets much more than a newly eligible population would.[5] Using average costs and federal matching rates from the Kaiser Family Foundation, these new enrollees will cost the non-expansion states $700 million in 2014 alone.[6]

The following map and table further explain the woodwork impact on non-expansion states. The map depicts the cost incurred from the woodwork population, and some savings in states that are not experiencing increases in enrollment. States that experience higher enrollment and therefore higher Medicaid costs are darker shades of red, while the states in shades of blue saw decreases in Medicaid enrollment, realizing savings in state costs to the program. The table below explains the woodwork enrollment and cost estimates in non-expansion states.

Sixteen states are seeing an increase in Medicaid beneficiaries despite the decision to maintain pre-ACA eligibility levels. Florida in particular is seeing a drastic increase in Medicaid enrollment, an 8 percent increase in beneficiaries over the last five months.[7] Since Medicaid has a continuous enrollment policy, these numbers will continue to increase throughout 2014, incurring more costs for states. Though most non-expansion states are experiencing an increase in enrollment, data indicates a handful of states are seeing decreases in costs as a result of decreased enrollment.

The changes in enrollment over the last five months are the best available data on observing the magnitude of the woodwork effect in non-expansion states. However, the changes in Medicaid enrollment could also be influenced by seasonal effects or a recovering economy—the national unemployment rate has fallen 0.5% since October.[8] These increased cost estimates do not take into account any approximation of the effect of economic growth or seasonality on enrollment.

 

Estimated Medicaid Enrollment and Cost due to Woodwork Effect in Non-Expansion States

State

Increased Enrollment

Average Enrollee Cost

Federal Matching Rate

 Cost Estimate

Alabama

-29,900

$4,150

69.0%

-$38,530,000

Alaska

-4,200

$9,310

50.0%

-$19,670,000

Florida

245,400

$4,430

59.7%

$438,200,000

Georgia

23,900

$3,920

66.9%

$31,000,000

Idaho

16,700

$6,020

71.8%

$28,340,000

Indiana

200

$4,790

66.5%

$280,000

Kansas

17,300

$6,000

56.6%

$44,980,000

Louisiana

-11,600

$5,200

62.1%

-$22,900,000

Maine

No Data

$5,970

61.9%

No Data 

Mississippi

6,200

$5,010

73.6%

$8,250,000

Missouri

No Data

$6,880

63.5%

No Data 

Montana

9,600

$7,140

65.9%

$23,470,000

Nebraska

-17,600

$6,170

53.3%

-$50,560,000

North Carolina

42,200

$5,800

65.9%

$83,570,000

Oklahoma

24,800

$4,780

62.3%

$44,760,000

Pennsylvania

12,700

$7,290

51.8%

$44,500,000

South Carolina

29,000

$5,120

70.6%

$43,560,000

South Dakota

-500

$5,780

51.6%

-$1,360,000

Tennessee

10,900

$5,570

65.0%

$21,190,000

Texas

-16,300

$5,280

58.1%

-$36,070,000

Utah

7,900

$4,890

70.6%

$11,320,000

Virginia

29,900

$5,990

50.0%

$89,340,000

Wisconsin

-15,000

$5,230

58.3%

-$32,710,000

Wyoming

200

$6,210

50.0%

$530,000

Notes:

       

Positive cost values reflect additional costs, and negative cost values reflect savings.

 


[1] Health Affairs. Medicaid Welcome Mat Effect of Affordable Care Act Implementation could be Substantial. July 2013.

[2] Medicaid & CHIP: February 2014 Monthly Applications, Eligibility Determinations, and Enrollment Report, Center for Medicare and Medicaid Services, April 4, 2014, available at: http://www.medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/February-2014-Enrollment-Report.pdf

[3] Stento, Jenna, Avalere AnalysisL Ten States Driving New Medicaid Enrollment, Avalere Health, April 7, 2014, available at: http://www.avalerehealth.net/expertise/managed-care/insights/avalere-analysis-ten-states-driving-new-medicaid-enrollment

[4] Medicaid & CHIP: February 2014 Monthly Applications, Eligibility Determinations, and Enrollment Report, Center for Medicare and Medicaid Services, April 4, 2014, available at: http://www.medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/February-2014-Enrollment-Report.pdf

[5]The federal matching rate or Federal Medical Assistance Percentage (FMAP) is the federal contribution to state Medicaid programs. This contribution is calculated based on state per capita income and ranges from federal funding for 50 percent of a state’s Medicaid program to about 75 percent federal funding for the pre-ACA Medicaid population. The ACA increased FMAP levels for the Medicaid expansion population to 100 percent federal funding in 2014-2016. The FMAP is recalculated by CMS for every state on an annual basis.

[6]Medicaid Payments per Enrollee, FY2010, Kaiser Family Foundation, accessed on March 31, 2014, available at: http://kff.org/medicaid/state-indicator/medicaid-payments-per-enrollee/; Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier, Kaiser Family Foundation, accessed on March 31, 2014, available at: http://kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/

[7] Medicaid & CHIP: February 2014 Monthly Applications, Eligibility Determinations, and Enrollment Report, Center for Medicare and Medicaid Services, April 4, 2014, available at: http://www.medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/February-2014-Enrollment-Report.pdf

[8] Unemployment data is available from the Bureau of Labor Statistics at: http://www.bls.gov/data/#unemployment

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