Policymakers and Medicaid officials are understandably interested in whether welfare leavers who also leave Medicaid are different from those who remain enrolled in Medicaid. In particular, they want to know whether welfare leavers who continue on Medicaid are likely to be more costly than those who leave Medicaid would have been. Differences in expected expenditure levels could cause State Medicaid programs to experience adverse selection among those leaving welfare. Welfare leavers with few medical-care needs at the time of welfare exit may be less inclined to maintain Medicaid coverage, particularly if they believe that they will be able to reestablish Medicaid coverage if they need it. Conversely, welfare leavers with medical needs--especially those with considerable needs--can be expected to maintain Medicaid coverage in order to maintain access to care. As a result, State Medicaid programs may be continuing coverage for welfare leavers with greater anticipated medical expenditures, while losing healthier welfare leavers who are likely to cost less.
SMRF data enabled us to explore whether there were differences in expenditure patterns among welfare leavers who left Medicaid, compared to those who remained enrolled. We first looked at unadjusted expenditure differences and then differences that adjusted for age, sex, and race/ethnicity in a regression framework. However, the SMRF expenditure data had important limitations. First, we could only use expenditure data for welfare leavers not participating in managed care programs. Because services provided through managed care are not available in the SMRF data, the expenditure information for these individuals is not equivalent to those in fee-for-service. We were able to identify those individuals in managed care in all the study states but California; therefore, California is excluded from the expenditure analysis.5 Second, the person summary files in the SMRF data only included annual expenditure levels. As a result, we could not separate Medicaid expenditures for individuals into the time periods before and after welfare exit. To adjust for varying lengths of enrollment, we computed an average monthly expenditure level.
The sample used in the previous analysis was further restricted for this analysis of expenditures. First, we limited our sample for the expenditure analysis to persons who left welfare in July through October. Our earlier analysis also included persons who left welfare in February through June. This restriction allowed us to minimize the time period over which expenditures could be incurred after welfare exit. Nevertheless, some bias to our results is possible if the level of Medicaid expenditures after welfare exit (for those who remained on Medicaid) was markedly different from the expenditure level prior to exit. Second, the sample for the expenditure analysis was further restricted to welfare leavers who were enrolled continuously until the point of welfare exit in order to minimize the problem of enrollment periods that were too short for individuals to obtain medical care. As a result, all individuals in our sample had at least six months of enrollment during 1995.
As we expected, study results showed that most individuals who left welfare, but did not maintain Medicaid coverage, had lower average monthly expenditures compared to those who remained on Medicaid. Unadjusted data are presented in Tables 6 and 7. These data show that adults and children who left welfare but did not maintain Medicaid coverage, were less likely to have had at least some Medicaid expenditures when they were on welfare; they were less likely to have had an inpatient admission; their median monthly Medicaid expenditures were lower; and most had average monthly expenditures that were lower than the expenditures of welfare leavers who remained on Medicaid.
Among the adults who left both welfare and Medicaid, the proportion incurring no Medicaid expenditures while enrolled ranged from 22.5 percent (Michigan) to 35.0 percent (Alabama). In comparison, only 5.5 percent (Michigan) to 12.2 percent (Florida) of the adult welfare leavers who remained on Medicaid had zero Medicaid expenditures while enrolled. Inpatient admissions ranged from 7.4 percent (Alabama) to 10.0 percent (Michigan) among those leaving Medicaid, and from 13.6 percent (New Jersey) to 16.8 percent (Florida) among adults maintaining coverage. Median monthly Medicaid expenditures were less among those leaving Medicaid and ranged from $19 (Alabama and Florida) to $36 (Michigan and New Jersey). Adults maintaining Medicaid coverage had median monthly expenditures that ranged from $46 (Alabama) to $69 (Florida). Average monthly Medicaid expenditures for adults leaving welfare and Medicaid were significantly less in two of the four states and ranged from $123 (Alabama) to $280 (New Jersey), compared to a range of $139 (Alabama) to $235 (New Jersey) among adults who remained on Medicaid after leaving welfare.6
Expenditure patterns among children were similar to those of adults: children who left Medicaid were less likely to have expenditures while enrolled and less likely to have an inpatient admission; they had lower median and average monthly Medicaid expenditures. From 30.3 percent (Michigan) to 46.0 percent (Florida) of children leaving welfare and Medicaid did not incur any expenditures while enrolled. This compares to a range of 6.3 percent (Michigan) to 12.0 percent (Florida) for those who maintained their Medicaid coverage. Across the study states, between two and three percent of children leaving Medicaid had inpatient hospital admissions prior to welfare exit, compared to a rate of four to seven percent among children who remained on Medicaid. Average monthly Medicaid expenditures for children leaving welfare and Medicaid were significantly less in three of the four states (the exception was Michigan), ranging from $49 (Alabama) to $84 (New Jersey), compared to a range of $66 (Michigan) to $99 (New Jersey) among children who remained on welfare after Medicaid.
We also analyzed the relationship between monthly Medicaid expenditures and whether an individual maintained Medicaid after leaving welfare in a regression framework. Logistic regression was used to determine whether greater monthly Medicaid expenditures were associated with an increased probability that a welfare leaver would maintain Medicaid coverage. Tables 8 and 9 present the results of the regression analysis and Appendix Tables 1 and 2 present the full regression specification. The analysis is based on comparing each quintile of expenditures to having no expenditures. The use of quintiles rather than a continuous measure of average monthly expenditures allowed us to look at sections of the distribution of expenditures and compare and contrast those with few expenditures and in the first quintile to those with relatively large expenditures and in the fifth quintile.7
Similar to the unadjusted data, across all states adults and children with any positive amount of monthly Medicaid expenditures while enrolled were significantly more likely to maintain Medicaid coverage when leaving welfare. For example, in Alabama, adults in the first quintile of expenditures were two times more likely to maintain coverage compared to adults with no expenditures. If an adult had expenditures in the fifth quintile, the probability of maintaining coverage was 2.6 times.
A similar pattern is seen among children--when they had at least some Medicaid expenditures while enrolled, they were significantly more likely to maintain Medicaid coverage and the magnitude of a child’s monthly expenditures was more likely to be related to the probability of maintaining Medicaid coverage. For example, in Alabama, children with expenditures in the first quintile were more than four times as likely to maintain Medicaid coverage compared to children with no expenditures. When children in Alabama had expenditures in the fifth quintile, they were nine times more likely to maintain Medicaid when leaving welfare. Clearly, in Alabama whereas having any expenditures significantly increased the probability that a child leaving welfare would maintain Medicaid coverage, children with greater levels of expenditures were much more likely to maintain coverage, compared to those with fewer expenditures.