Faithin Omaha eBook Collection

Download or read book Spillover Effects of Medicaid Expansion on Private Premiums written by Cameron Ellis and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Affordable Care Act is one of the most debated and dividing pieces of legislation in recent memory. One of the main elements of the ACA is the optional expansion of Medicaid eligibility to 138 % of the federal poverty line. The current debate has focused on the direct effects of the newly covered vs. the accounting cost of doing so, but there are also important other spillover effects to consider. In states that refused the Medicaid expansion, there exists a coverage gap that the private market will, at least partially, pick up. This gap, and the portion picked up, are not random and systematically exhibit higher expected costs. This raises prices for everyone taking part in the health insurance exchanges in states that refused the expansion. Our contribution is three-fold. We first confirm the interaction between the individual market and Medicaid expansion. We find that refusing the Medicaid expansion increases average monthly premiums by $22.94, an increase of 7.6 %. Our second and third contributions are more novel. We use a sharp discontinuity in the subsidy rates and find the premium increase is due to asymmetric information arising from the cost sharing reduction subsidies. We also provide a clean estimation of -0.34 for the price elasticity of healthcare in a pseudo-random experimental setting. Finally, we are able to separate the asymmetric information effect into adverse selection and moral hazard and find the moral hazard effect dominates.