Jeff Clemans is posting a very interesting set of posts on the argument that Medicaid expansion lowers the premiums for the Exchange population. The mechanism is simple; Medicaid acts as a quasi-high risk pool and vaccuums up a disproportionate number of high cost individuals. That creates a high cost Medicaid pool, and a healthy, low cost Exchange pool. However there is one line that I think needs further explanation.
Under national health reform, community rating regulations apply to purchases made on state exchanges by both individual consumers and small employers. In 2011, the health care costs of individuals getting insurance in these ways averaged $4,300 (with lower costs for the healthiest among them). By contrast, health care costs for nonelderly adults on Medicaid averaged $8,300 (even though Medicaid pays low rates to hospitals and physicians).
Non-elderly adults who are on Medicaid in 2011 fall into a couple of general populations for most states. The first population is expectant mothers, the second is chronic disease sufferers and the last group may be people who are just extremely poor (where extreme poverty is heavily correlated with poor health as there are no good choices available). Babies are absolutely adorable, but they like to put merconium meconium on the financial statements of states and insurers. An uncomplicated pregancy with a simple vaginal delivery will cost Medicaid $8,000 to $12,000; a high risk pregnancy could run ~$100,000 to $300,000 for a prolonged NICU stay. Chronic conditions mean frequent contact with providers and heavy prescription usage.
The key here is to understand case mix comparisons. A risk pool of 500 pregnant women, 100 diabetics, 75 hypertsensive, 25 traumatic brain injuries and 200 people in reaosnably decent health but are dirt poor and 100 random chronic conditions is far more medically needy than a random sample of 1,000 people who have employer sponsored group health insurance.
Just on the basis that Medicaid pays much lower reimbursement to provders for physical health services than commercial insurers, an equalized case mix comparison of Medicaid and commercial populations would show that Medicaid is much cheaper. I know that Jeff knows that, but this is a distinction we need to make in analyzing claims.