Medicaid in ACA Marketplaces : the welfare impact of New Hampshire’s Medicaid experiment

The United States health care system faces ongoing academic and policy debates concerning the most effective ways to administer publicly funded health insurance plans. This thesis investigates market-based approaches through the lens of the Affordable Care Act (ACA), specifically focusing on New Hampshire's expansion of Medicaid coverage via ACA Marketplace plans as an alternative to Medicaid Managed Care.

In the first chapter, this thesis examines three economic forces introduced by a form of Medicaid privatization, whereby individuals eligible for Medicaid can select plans on an ACA Marketplace and have their premiums fully subsidized. These forces include (1) increased insurer entry into the Marketplace, (2) decreased enrollee premium sensitivity from the fully subsidized Medicaid population, and (3) risk pooling between the Medicaid and non-Medicaid individual market populations. Using a structural model and all-payer claims data from New Hampshire, the chapter explores the impact of these forces on premiums, coverage and welfare, as well as policy alternatives mediating these. These counterfactual policies of premium-sensitive auto-enrollment, reinsurance equalizing costs, and removing the expansion population and entrants in full, also also serve to isolate the economic forces. The results highlight the importance of both lower premium sensitivity and higher average cost—factors that the model accounts for according to estimates of a Nash-in-Nash bargaining model—within the context of market equilibrium and bargaining between insurers and a regulator.

The second chapter delves deeper into costs and utilization by incorporating pre- and post-data in an experiment and return experiment to compare two distinct regimes: Medicaid Managed Care and Exchange plans within the New Hampshire Health Protection Program (NHHPP) under the ACA Medicaid Expansion. Using a quasi-experimental approach with difference-in-differences (DID) and event study to determine the causal effect of transitioning to private plans, the analysis reveals higher allowed amounts to health care providers but comparable billed amounts. It also shows increased utilization in specific areas, such as emergency room visits, inpatient care, and drug prescriptions, with minimal effects or decreases in other areas like outpatient care. Furthermore, the chapter supports the significant heterogeneity in insurers identified in the first chapter and underscores how different plans exhibit substantially higher emergency room visits, some of which might be causal as measured by an instrumental variable approach using auto-enrollment into various plans. This chapter offers evidence of considerable cost differences between the two approaches to administering fully-subsidized health insurance coverage, lending credibility to the welfare results in the first chapter, which are largely driven by these cost disparities

By comparing economic forces of competition, such as Nash-in-Nash bargaining with a regulator in the first chapter, and costs and utilization under different regimes in the second chapter, this thesis contributes to the broader policy debate on methods for organizing and administering publicly funded health care. It provides insight into the real-world trade-offs of introducing competition or innovation in plan administration and markups through higher prices when using a more market-based approach for social insurance plans.