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Medicaid Crowd-out of Other Public Health Spending: Modeling Economic and Health Effects
International Association of Health Economics World Congress (2015)
  • Glen P. Mays, University of Kentucky
MOTIVATION: Thirty states are expanding Medicaid eligibility under the Affordable Care Act (ACA) as of 2015, and while federal funds cover most costs for newly eligible recipients, states must share the additional costs of covering previously-eligible state residents who enroll in Medicaid. States, together with their local government counterparts, also provide the vast majority (87%) of public sector funds for public health programs designed to promote health and prevent disease and injury on a population-wide basis. Fiscal constraints and generous federal matching funds create strong budgetary incentives for states to channel their health-related spending to Medicaid rather than to other types of public health programs and policies. The ACA may exacerbate Medicaid’s tendency to crowd out other types of public health spending, possibly resulting in unintended, adverse effects on population health. OBJECTIVES: Using a unique longitudinal data series on governmental spending from the 1992-2014, this study: (1) estimates the degree to which state Medicaid spending complements or crowds out other state and local public health spending over time; and (2) uses crowd-out estimates in combination with estimates of service delivery and mortality effects from other studies to simulate the impact of ACA’s Medicaid expansions on public health financing, service delivery, and preventable mortality. DESIGN: A retrospective cohort design follows 50 states and approximately 2500 local public health agencies over the period 1992-2014 using periodic surveys of local agencies conducted by NACCHO combined with data from the U.S. Census of Governments (COG), Area Resource File, and state Medicaid reports. We construct separate measures of annual state Medicaid spending, state and local hospital spending, and state and local public health spending on a per capita scale. Fixed-effects and dynamic structural equation models are used to estimate the effects of Medicaid and hospital spending on public health spending, while controlling for a rich set of fiscal, demographic, socioeconomic, and health resources variables. Instrumental variables techniques are used to control for unobserved characteristics that simultaneously influence Medicaid and public health spending, using information on state Medicaid policy changes, Federal Medical Assistance Percentage (FMAP) changes, and public health governance characteristics as instruments. We estimate separate models at (1) the state level only and (2) both state and local level using hierarchical specifications. Population Studied: A total of 50 states and 2467 local public health agencies are examined over a 22 year period. RESULTS: Medicaid spending produces sizeable crowd-out effects on public health spending at both state and local levels during the study period. A 10% increase in state Medicaid spending was associated with a 4.1% reduction in state public health spending (p<0.05) and a 5.9% reduction in local public health spending (p<0.01) after adjusting for unobserved confounding, with a strong tendency toward larger crowd-out in states with smaller tax bases. Simulation results indicate that state Medicaid spending growth during 2014-20 could reduce public health spending by 9-16%, resulting in a 2-8% growth in preventable mortality rates that could partially or fully offset the beneficial mortality effects of expanding insurance coverage. CONCLUSIONS: Growth in state Medicaid coverage and spending has been shown to have positive effects on health and wellbeing, but these effects may be blunted by the crowding out of state and local public health spending. The magnitude of observed crowd-out is sufficiently large to generate adverse effects on public health service delivery and health outcomes. Diminished state and local public health spending is likely to be an unintended consequence of ACA implementation, emphasizing the importance of strategies like the Public Health and Prevention Fund to reinforce governmental investments in public health activities.
Publication Date
Summer July 14, 2015
Milan, Italy
Citation Information
Glen P. Mays. "Medicaid Crowd-out of Other Public Health Spending: Modeling Economic and Health Effects" International Association of Health Economics World Congress (2015)
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