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Monday, August 2 • 2:15pm - 3:45pm
2A2 Does Medicaid Make Private Health Insurance Cheaper?

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Jonathan Holmes, Berkeley

Models of consumer choice and selection in health insurance markets typically focus on decisions within one market setting (e.g. choice of plans offered by an employer). This paper focuses on selection and choice at the broader level of health care markets, comparing Medicaid, employer sponsored insurance, and insurance exchanges. I study cross-market adverse selection in the context of the Affordable Care Act, which simultaneously expanded Medicaid while creating health insurance exchanges. Using state decisions to expand Medicaid and variation in federal reinsurance payments as identification, I find that Medicaid expansion reduced prices on individual health insurance exchanges by an average of $504 (9.7%) per person, per year. These price reductions on the individual market represent an indirect benefit of Medicaid expansion that is equal to 9% of the total costs of expansion, and increased enrollment of higher income individuals (above 400% of the Federal Poverty Level) on the individual market by 10%. JEL Codes: I13, I38, H51


Petra Steinorth

University of Hamburg


Monday August 2, 2021 2:15pm - 3:45pm EDT