Medicaid Expansion Leads to Higher Private Insurance Costs

By Matthew Nicaud
October 7, 2021

Many across the state have advocated for the expansion of Medicaid with assertions that the state will “come out better” with expansion than without it. Despite these assertations, it is important to remember that while the federal government provides a match to state funds, it is ultimately the state that foots the bill.

Medicaid is a joint state and federally funded program initially created to provide government health care for limited portion of the population. With the passage of the Affordable Care Act, better known as “ObamaCare” the states were given the option to further expand eligibility for their Medicaid programs and have that expansion “matched” by the federal government.

Mississippi has wisely opted not to expand Medicaid. The federal government matches Medicaid expansion, but it is ultimately the responsibility of the state to pay a portion of the costs of the program. Time and time again, Medicaid expansion is pitched as “free money” from the coffers of Washington, but this money is not free.  

In the midst of the debates surrounding matching rates, federal funding, and expansion enrollment projections, many often forget Medicaid expansion's influence on increasing private health insurance costs. This would only be heightened in the event of Medicaid expansion.

Since Medicaid reimbursement rates are often much lower than private-sector rates, many doctors then pass on the extra costs by charging even more for private sector insurance. These extra costs lead to higher premiums for private health insurance. In turn, more individuals leave private health insurance and go to “cheaper” government programs like Medicaid. This cycle repeats, and the more people that leave private health insurance, the more expensive it becomes as doctors try to recuperate costs through the private sector. This coincides with an analysis conducted by the Heritage Foundation on an Ohio Medicaid expansion proposal.

Many new Medicaid enrollees would also find that doctors are less likely to accept Medicaid than the private coverage the enrollee might have had. In a study done by the Medicaid and CHIP Payment and Access Commission (MACPAC), the data concluded that as little as 66 percent of doctors accepted Medicaid in many states.

Thus, rather than expanding healthcare access, Medicaid expansion could actually cut down healthcare access as more and more individuals are forced to move to coverage that is not as widely accepted as private insurance. Despite this lower-quality health insurance, many individuals would have little choice in their leaving private health insurance due to the inflated premiums that would be influenced by Medicaid expansion in the first place.

When considering the question of Medicaid expansion, state leaders should take more into account than just the raw numbers that determine how much “free money” would come to Mississippi through Medicaid. Even if the Mississippi government “came out better” on a short-term basis, the long-term effects of government expansion ultimately interfere with the private sector and increase the cost of health insurance.


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