Association for Public Policy Analysis & Management

Some state Medicaid programs, when using waivers to expand coverage to low-income but not poor enrollees, charge premiums as a way of offsetting the cost of care and of making the program more like private insurance.  Many states have current proposals or recently approved waivers that implement such premiums. Knowledge about how variation in premiums affects take-up and retention is currently limited, especially among newly covered populations of adults without dependent children. We study how variations in premiums affect the enrollment of adults in Medicaid. In June 2012, Wisconsin introduced premiums for all new and current adults in BadgerCare Plus (the state’s Medicaid program) with family income from 133%-150% of the Federal Poverty Level, increased premium amounts for those with incomes above 150%, and  expanded  the consequences of nonpayment of premiums by increasing the restrictive re-enrollment period from six to 12 months. We use a difference-in-differences design embedded in a hazard model  to study the effects of these changes. We find that a large fraction of currently enrolled beneficiaries exited immediately upon implementation of the premium requirement, but exit rates rapidly stabilized to a new, higher, level. New premium-paying groups had exit rates 2.8-3.1 times higher than the comparison group, while current premium-payers facing higher premiums had exit rates 1.7-1.8 ties higher. We find no evidence that these exits are differential by health care usage. We find that a large fraction of those who exited later re-enrolled at a lower income level, and show the degree to which this is due to administrative errors in income reporting causing “churn” or actual changes in income. Introducing and changing premiums has important negative effects on the enrollment and retention of higher-income Medicaid enrollees. Premiums will affect take-up and continuity of coverage for relatively low-income enrollees and, beyond Medicaid this has implications for subsidized exchange-based insurance.  Low-income enrollees are likely to forego premium payments, as they did in Wisconsin’s Medicaid program even when facing significant lock-out periods.   Premiums, rather than serving as a significant revenue offset of Medicaid costs, may yield cost savings indirectly by deterring  participation in the program.