Expanding Medicaid: Less Costly Covering More Low-Income Uninsured than Expanding Private Insurance

shelli.g905 | October 20 / 2008 | Backgrounders

Average medical expenditures per person are lower under public programs such as Medicaid or the State Children’s Health Insurance Program (SCHIP) than under private insurance, according to new research published by Health Affairs. The new research, by Leighton Ku of George Washington University and Matthew Broaddus of the Center on Budget and Policy Priorities, is consistent with previous work by researchers at the Urban Institute, according to the Center on budget and Policy Priorities.

There are two main reasons why overall medical expenditures per person are lower under Medicaid and SCHIP than under private insurance. First, the average cost that insurers pay per beneficiary is lower under public programs than under private insurance, probably because these programs reimburse health care providers at lower rates and have lower administrative costs. Second, the average out-of-pocket costs that individuals incur are substantially lower under public programs than private insurance because Medicaid and SCHIP limit cost-sharing for low income beneficiaries, the Center noted in its report.

Key findings of the study include:

  • Adults enrolled in Medicaid tend to be in poorer health – and require more health care – than low-income adults.
  • Adults enrolled in Medicaid are more likely than low-income adults with private coverage to be female, minority, and poor – three groups with higher medical costs.
  • If one fails to adjust for these health and demographic differences, medical expenditures are higher for Medicaid beneficiaries than for those in private practice.
  • After controlling for these health and demographic factors, medical expenditures are substantially higher under private insurance than under Medicaid.
  • Medical costs paid by insurance are higher under private coverage than under Medicaid.
  • Out-of-pocket costs are substantially higher under private coverage than under Medicaid.
  • Covering the uninsured through Medicaid would generally be less costly – in terms of total medical expenditures, costs paid by insurance, and out-of-pocket costs per individual – than covering them through private insurance.
  • To access the actual article, “Public and Private Insurance: Stacking Up the Costs,” visit
  • http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.4.w318