NCPA - National Center for Policy Analysis

The Impact of State Medicaid Expansion in Arizona

December 9, 2013

Arizona has responded to financial incentives in the Affordable Care Act (ACA) by expanding Medicaid eligibility. What will be the impact of the expansion? There are three primary outcomes, say Michael Bond, a senior fellow the National Center for Policy Analysis, and Stephen T. Parente, the Minnesota Insurance Industry Chair of Health Finance in Carlson School of Management and professor in the Finance Department at the University of Minnesota.

  • The number of privately insured individuals will fall 333,000 in 2014 and, by 2023, the number of privately insured will be 450,000 fewer than it would be otherwise.
  • The net number of Medicaid participants will increase1.07 million in 2014 and, by 2023, the number of Medicaid enrollees will be 1.65 million higher than it would be otherwise.
  • The total cost to the state of covering these new Medicaid beneficiaries will reach $906 million annually within the next decade.

Using a microsimulation model, Bond and Parente estimate the specific effect on the state of Arizona of the Medicaid expansion.

  • The net result of the expansion in Arizona is an increase of Medicaid recipients.
  • Given that over two-thirds of the expected national increase in the insured from ACA was to come from Medicaid expansion, this is not surprising.

However, the ACA offers subsidies to private insurance coverage purchased through state and federal exchanges. Individuals with incomes from 100 percent to 133 percent of poverty are eligible for subsidized coverage in the health insurance exchange if their employer does not offer coverage and they are not eligible for Medicaid. Nearly one-third of nonelderly Arizonans in this income group have employment-based or individually purchased private insurance coverage. Thus, Medicaid expansion will significantly shrink the individual and employer-offered private insurance market.

The model allows Bond and Parente to project the loss of private coverage by insurance type. Some of the individuals eligible for expanded Medicaid would otherwise be covered by high-deductible private insurance plans. Some would be covered by narrow-network preferred provider organizations (PPOs) and others would be enrolled in health maintenance organizations (HMOs).

  • The number of individual Arizonans covered by high-deductible health plans will fall by 211,000 in 2014.
  • The number of enrollees in narrow network PPOs will fall by 16,500 in 2014.
  • Enrollment in generous PPOs will decrease initially and then become more popular by 2023.
  • HMO enrollment growth will flatten by 2023.
  • Coverage by government-employer health insurance will fall by 16,600 in 2023.

Source: Michael Bond and Stephen T. Parente, "The Impact of State Medicaid Expansion in Arizona," National Center for Policy Analysis, December 2013.


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