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Wednesday, March 6, 2013

Comparing Medicaid and Exchanges: Benefits and Costs for Individuals and Families

Evelyne P. Baumrucker
Analyst in Health Care Financing

Bernadette Fernandez
Specialist in Health Care Financing

The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) expands health insurance coverage primarily through two mechanisms: by expanding the existing Medicaid program and by establishing new health insurance exchanges where certain individuals and businesses can purchase private health insurance. Under ACA, Medicaid and exchanges are envisioned to work in tandem, with the potential to provide a continuous source of subsidized coverage for lower-income individuals and families, beginning in 2014.

On June 28, 2012, the U.S. Supreme Court issued a decision in National Federation of Independent Business v. Sebelius. The Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program, effectively making the ACA expansion “optional.” As a result, some states may choose not to expand their Medicaid program. Individuals who are eligible for Medicaid are not eligible for subsidies in exchange plans. Thus, some individuals in these states would not be eligible for Medicaid and could become eligible for subsidized exchange coverage, while others may remain uninsured.

Individuals who receive coverage through exchange plans will likely not receive the same benefits offered by the Medicaid program, and vice versa. For example, traditional Medicaid provides a wide range of benefits to certain beneficiaries that are not typically covered in major medical plans in the private market, such as non-emergency transportation services or Early Periodic Screening, Diagnosis, and Treatment (EPSDT). Exchange plans will reflect a “typical” private health insurance plan offered by employers, which generally includes a wide range of benefits, but not necessarily all, that are offered to various Medicaid groups of individuals. Exchange plans will be required to offer essential health benefits, which include preventive services with no cost-sharing, a benefit available to many, but not all, Medicaid beneficiaries. Thus there will likely be differences in available benefits for some individuals, depending on whether they are covered by Medicaid or exchange plans.

In lieu of traditional Medicaid benefits, states can choose to offer an alternative set of benefits (benchmark and benchmark-equivalent coverage) that will include the essential health benefits, but only to certain groups of Medicaid beneficiaries. This alternative set of benefits has the potential to more closely align the benefits under Medicaid and the exchange for certain individuals.

In addition to differences in benefits, there may also be differences with regard to the costs required of individuals. Currently, states may require certain Medicaid beneficiaries to share in the cost of services, but because of their lower income, such obligations are generally limited. Nonetheless, variation exists across the different categories of Medicaid eligibility groups with respect to costs. Similarly, ACA provides for premium and cost-sharing assistance for the purchase of exchange plans for certain lower-income individuals. However the only permissible variation across qualified individuals (or families) for these exchange subsidies is based on income.

Another group for whom the alignment between Medicaid and exchanges is important is composed of individuals who are covered by Medicaid today, but who may lose Medicaid coverage when states are allowed to scale back their Medicaid program. This state “maintenance of effort” requirement for covering certain adults will be lifted beginning in 2014 (and in 2019 for 
the coverage of children). Some of these individuals will qualify for subsidies through exchange plans, while others may become uninsured. Additionally, some individuals may “churn”; that is, they may go back and forth between Medicaid and exchange coverage, depending on their financial or other situation at the time. While some “churning” may be unavoidable, minimizing its effects may be critical to the health coverage of affected individuals and families.

The 113
th and future Congresses will likely continue to play a significant role in shaping U.S. health care policy. This report provides an analysis of some of the key similarities and differences between Medicaid and insurance plan structure in plans offered through exchanges. Because Medicaid services vary by population covered and by state, and exchanges’ plans can also vary by state, this report provides insight into the complexities and issues when comparing beneficiary benefits and costs to individuals for Medicaid and the exchanges. The inherent variations in Medicaid and the uncertainty about exactly how the exchanges will operate are just two of the factors that complicate a comparison.

Date of Report: February 28, 2013
Number of Pages: 30
Order Number: R42978
Price: $29.95

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