Medicaid costs for expansion enrollees increased 20 percent after two and a half years, according to a report from Avalere Health.

In the first half of 2014, average monthly Medicaid costs totaled $324 for enrollees. After being enrolled for two and a half years, those monthly costs increased to $389—an increase of 20 percent.

"Health care spending for the Medicaid expansion population increased steadily over time for beneficiaries who remained enrolled in the program" the report states. "The enactment of the Affordable Care Act (ACA) provided states with the option of extending Medicaid eligibility status to childless adults aged 19-64 who earn less than 138 percent of poverty ($16,643 for an individual)—many of whom were previously uninsured."

Over time, the analysis notes that younger, healthier enrollees tend to disenroll, while those who are in the program for longer are more likely those with chronic health problems.

"Contrary to some expectations that Medicaid expansion enrollees would be relatively healthy, beneficiaries who have remained on the program have increasing health care needs, likely due to previously unidentified or untreated conditions," said Caroline Pearson, Avalere's senior vice president. "Healthier, lower-cost enrollees may be more likely to churn off Medicaid after a shorter period of time."

Costs for chronic care services, which include prescription drugs, increased over time in the first few months of coverage, while spending on emergency room visits and inpatient hospital care declined.

The analysis finds that expansion enrollees likely had significant medical needs when they enrolled due to the high rates of emergency room use and inpatient hospital care. Over time, the analysis finds that enrollees' health care costs shift away from hospitalizations to prescription drugs and outpatient visits, which are more of a sign of chronic disease treatment.

"As new Medicaid beneficiaries gain a consistent and sustained source of insurance coverage, their spending patterns reflect improved care for chronic conditions and less need for acute hospitalizations," said Michael Lutz, Avalere's vice president. "This suggests that newly insured populations have underlying health needs but insurance coverage may help rationalize their health care spending in favor of longer-term, less costly treatments overall."