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Study: Health insurance exchanges trump Medicaid Posted: April 24th, 2013

By Maryalene LaPonsie

The federal government is working to expand Medicaid eligibility for families earning more than 100 percent of the poverty limit, but one advocacy group says there are better medical insurance options for low income families.

According to the National Center for Policy Analysis, families earning slightly more than the poverty level will be better served by health insurance exchanges rather than Medicaid. The organization says private health insurance plans purchased through exchanges will give low-income families better quality care while physicians will gain additional medical spending.

Helping families find low cost health insurance

At issue is how families earning slightly more than the poverty limit will obtain health insurance coverage in 2014. The Patient Protection and Affordable Care Act has mandated virtually all U.S. residents maintain medical insurance by that year.

To help low-income families find affordable health insurance, the government is working to expand eligibility to state-administered Medicaid programs. However, the NCPA argues private health insurance plans offered through health insurance exchanges offer better value for both patients and the medical community.

Health insurance exchanges are scheduled to be launched by 2014 in all states. The exchanges will offer private medical insurance that meets specific guidelines. Families earning between 100-400 percent of the federal poverty limit will be eligible for subsidies to pay the premiums.

Private health insurance plans vs. Medicaid

The NCPA says coverage from exchanges trump Medicaid coverage for several reasons:

  • Private health insurance plans reimburse doctors and health care providers at a rate that is about 75 percent more than Mediciad reimbursement. As a result of low Medicaid reimbursements, a third of physicians decline to take on new Medicaid patients.
  • Since Medicaid patients may have difficulty finding physicians willing to treat them, they may overuse emergency room services which are significantly more expensive than office visits.
  • Private health insurance plans pay for more health care. The average spending by Medicaid per adult is $2,900 annually compared to $4,500 by private plans.
  • Government subsidies for low-income families purchasing health insurance coverage on exchanges are generous, and those buying on the exchanges will have a cap on their premiums equal to two percent of their income. These safeguards ensure low-income families will have access to affordable health insurance even if they are not eligible for Medicaid.

"Residents just above the poverty level will get better quality and access to care in the exchange than they would get under Medicaid because the exchange will pay doctors and hospitals at higher rates," said study author and NCPA Senior Fellow Devon Herrick, in a statement. "Ideally, states should not even consider expanding Medicaid above 100 percent of poverty. Let everyone at that poverty level go into the exchange."