Medicaid expansion’s effect on private insurance costs in Wisconsin: New studies

The debate continues about the how a potential Medicaid expansion might affect costs in the private insurance market in Wisconsin.  Competing studies seem to show opposite results, which makes it hard to know what to think.

Yet another study was released today by two economists, Junjie Guo and Noah Williams, at the Center for Research on Wisconsin’s Economy (CROWE).  This study attempts to correct an earlier study, by Noah Williams and Will Flanders, that had been released in February 2019, after that study had been widely discredited, including here, here, here, and here.  The new report abandons the data and methods used in the original report and, using different data and methods, now estimates the cost of Medicaid expansion widely in the range between $7.3 to$184 million.  The new report also acknowledges that Medicaid expansion could substantially reduce uncompensated care costs and also now indicates that Medicaid expansion could reduce private health premiums.

Two other UW economists, Gwyn Pauley and Matthew Wiswall, conducted a review of this new report, and find significant flaws in report’s methods and findings.  Pauley and Wiswall had released study in April 2019 that rebuts Williams’ previous CROWE report, and shows that the Medicaid expansion could result in substantial savings to private insurers and providers.  Now, Pauley and Wiswall again respond to today’s new CROWE report.  They demonstrate that, using corrected methods, a Medicaid expansion may lower costs in the private insurance market and produce overall savings from covering the uninsured.

The cost reductions reported by Pauley and Wiswall are consistent with the weight of the evidence.  A recent independent study published in the national journal Health Affairs reports that Medicaid expansion in Wisconsin could lower premiums for those with private individual insurance by improving that risk pool, and it would reduce uncompensated care at hospitals.  Another study, commissioned by the Wisconsin Office of the Commissioner of Insurance, also shows lower premiums in Medicaid expansion states. That report estimates that, under a Medicaid expansion, 25,000-30,000 Wisconsin residents currently enrolled in ACA Marketplace plans would become eligible for Medicaid.  These lower income consumers tend to have higher health risk, and their transfer from the Marketplace to Medicaid improves the risk pool in the ACA Marketplace and may thereby reduce those premiums.

– Donna Friedsam