Can Medicare Advantage help contain Medicaid costs? Evidence from dual eligibles

Medicaid spending reached $880 billion in fiscal year 2023, straining federal and state budgets and intensifying efforts to cut costs. Dual eligibles—individuals enrolled in both Medicaid and Medicare—comprised 14% of Medicaid enrollment in 2021 but accounted for 29% of expenditures. This paper studies the intersection of Medicaid and Medicare by comparing not just costs and utilization, but also quality for dual eligibles enrolled in public Traditional Medicare versus those in private Medicare Advantage plans. The results suggest that steering dual eligibles toward Medicare Advantage could yield annual government savings of up to $53.5 billion across Medicare and Medicaid, including $19.8 billion in Medicaid alone, without reducing eligibility. The results also suggest that these cost savings may not come at the expense of quality as measured by annual emergency room visits and beneficiary satisfaction. However, an analysis of switchers between plans reveals 6.36% lower beneficiary satisfaction with quality under Medicare Advantage, and cost savings are dependent on accurate government reimbursements to private insurers.