The Affordable Care Act (ACA) has already resulted in expanded eligibility for Medicaid in 27 states, including California, as of 2014. One major concern about the Medicaid expansion is that a high level of need among the newly eligible may lead to runaway costs, which could overwhelm state budgets when federal subsidies no longer cover 100 percent of the expansion population's costs in 2017. Although cost increases as a result of the newly eligible are likely, an even more important question is whether these increases will be temporary or permanent. Evidence from California's Low Income Health Program (LIHP) suggests that cost and utilization increases among newly eligible Medicaid beneficiaries will be mostly temporary.
This policy brief presents data showing a significant decline in the use of hospital inpatient care and emergency room visits after one year of enrollment in LIHP and a stable, not increasing, rate of outpatient service use. Because LIHP provided health care coverage from 2011 to 2013 in advance of the full Medicaid expansion, the findings suggest that early and significant investments in infrastructure and in improving the process of care delivery can effectively address the pent-up demand for health care services of previously uninsured populations.