What Actually Happens When You Expand Medicaid, as Obamacare Does?

A state-level experiment shines some much-needed light on the longstanding debate over federal aid to low-income families.


Then-Oregon governor Ted Kulongoski speaks to a reporter about his state's economic recovery efforts in 2009. Kulongoski's administration oversaw the Oregon Medicaid experiment. (OregonDOT/Flickr)

Polls have repeatedly shown that when given the Affordable Care Act (ACA) in its constituent pieces, the law's opponents express overwhelming support for its provisions. Greg Sargent parses the latest numbers, finding that even Republicans approve of the promised changes in large numbers. On one issue, though, conservatives remain unmoved: the part where the ACA expands Medicaid coverage to households making less than $30,000 a year.

Under the healthcare law, Medicaid coverage would be extended in 2014 to cover 16 million low-income Americans, on top of the 60 million it currently serves. Ideological arguments aside, what would such an expansion actually accomplish, and what would its consequences be? This is actually harder to determine than you might think; ethics rules prevent researchers from setting up a study in which they give healthcare benefits to one group while deliberately withholding them from another. Conveniently, though, something resembling that experiment has been performed in real life, under ideal conditions. What we've learned is kind of a mixed bag, giving ammunition to both Medicaid's supporters as well as its detractors.

The experiment began back in 2008, when the state of Oregon offered to extend Medicaid coverage to 10,000 randomly selected applicants. Scientists at Harvard and MIT took that opportunity to find out what happened to those people. One year out, the researchers have come back with some interesting findings. Basically, it's this: expanding Medicaid leads people to use more healthcare. That, in turn, drives up costs. But it's also associated with a rise in financial security, as well as improvements in patients' perceptions of their own health (no data are available yet as to actual health outcomes; it's too soon to tell).

Here's how the increased healthcare usage broke down: the new Medicaid beneficiaries were 35 percent more likely to use outpatient services, 15 percent more likely to take advantage of prescription drugs, and 30 percent more likely to check into the hospital -- though, curiously, emergency room use remained steady. Under the program, patients did a better job seeking out preventive care; compared to the uninsured, the Medicaid patients were 60 percent more likely to get breast cancer screenings. All this extra activity resulted in a 25 percent hike in costs to Medicaid, the researchers estimate.

There's more:

We also found that being covered by Medicaid improves self-reported health as compared with being uninsured. Medicaid enrollees are 25 percent more likely to indicate that they're in good, very good, or excellent health (vs. fair or poor health). They are 25 percent less likely to screen positive for depression. They are even 30 percent more likely to report that they are pretty happy or very happy (vs. not too happy).

Obviously, simply "feeling" healthier does not an argument for expanding Medicaid make. But the drop in depression diagnoses is a promising outcome given the condition's links to all manner of unpleasant health consequences. Taking greater steps to identify health problems before they happen has also been touted as a key requirement in keeping healthcare costs low over the long term. And improvements in financial security -- including a 40 percent drop in the likelihood of having to take out a loan or leave other bills unpaid due to spending on healthcare -- are a promising sign if the aim is to make healthcare more affordable.

If we're judging Medicaid expansion on the merits, where you fall in the debate depends on if you think the increase in healthcare spending is worth it. It's still unclear whether using more services makes up for the added costs by actually improving Medicaid patients' health -- again, it's too soon to say. But the answers are out there. The picture may not be nearly as murky as we think.