Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. 2. Implementing a Medicaid expansion versus a separate state insurance program


States deciding whether to implement a separate state insurance program or expand Medicaid will need to focus on differences between the potential for substitution of a Medicaid program versus a separate state program. States may consider the following questions with respect to understanding the complexity of substitution: What are the tradeoffs? What will influence family choice? Are there certain situations that foster substitution in one type of program versus another? Employer-sponsored plans have the ability to provide varying benefit packages and impose premiums, deductibles, and coinsurance which may have an impact on individuals at certain income levels. However, Medicaid programs have a comprehensive benefit package with minimal cost sharing for beneficiaries. In some cases, Medicaid has the potential for significant substitution due to these features, especially for populations such as children with special health care needs. Title XXI programs, can select from a range of "benchmark" or "benchmark equivalent" plans and have more flexibility on cost sharing. There are other considerations states may also take into account in deciding between a Medicaid expansion and a separate state insurance program. For example, there is a stigma attached to social insurance programs such as Medicaid that may deter families from substituting public for private programs.