The Hidden Subsidy of the Affordable Care Act

46 Pages Posted: 12 Jul 2024

See all articles by Liam Sigaud

Liam Sigaud

George Mason University - Mercatus Center

Markus Bjoerkheim

Mercatus Center - George Mason University

Vitor Melo

Clemson University; Mercatus Center; Initiative on Enabling Choice and Competition at the University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: July 08, 2024

Abstract

Under the ACA, the federal government paid a substantially larger share of medical costs of newly eligible Medicaid enrollees than previously eligible ones. States could save up to 100% of their per-enrollee costs by reclassifying original enrollees into the newly eligible group. We examine whether this fiscal incentive changed states' enrollment practices. We find that Medicaid expansion caused large declines in the number of beneficiaries enrolled in the original Medicaid population, suggesting widespread reclassifications. In 2019 alone, this phenomenon affected 4.4 million Medicaid enrollees at a federal cost of $8.3 billion. Our results imply that reclassifications inflated the federal cost of Medicaid expansion by 18.2%.

Keywords: State Spending, Medicaid, Affordable Care Act, Political Incentives, Medicaid Expansion, Federalism

JEL Classification: H71, H77, I13, I18

Suggested Citation

Sigaud, Liam and Bjoerkheim, Markus and Melo, Vitor, The Hidden Subsidy of the Affordable Care Act (July 08, 2024). Available at SSRN: https://ssrn.com/abstract=4889920 or http://dx.doi.org/10.2139/ssrn.4889920

Liam Sigaud (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://liamsigaud.com

Markus Bjoerkheim

Mercatus Center - George Mason University ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://www.mbjoerkheim.com

Vitor Melo

Clemson University ( email )

Clemson, SC 29631
United States

Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

Initiative on Enabling Choice and Competition at the University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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