Medicaid and poor adults: Who’s left out? How can federal policy help?

1. Medicaid and poor adults: Who’s left out? How can federal policy help? Stan Dorn The Urban Institute 202.261.5561 sdorn@urban.org http://www.urban.org/health_policy/ http://www.urban.org September 15, 2008

2. “Medicaid covers the poor … while Medicare is primarily designed for the elderly…”H. Sheppard, “States Get A Handle On Medicaid: Better Economy, Federal-law Changes Help,” Los Angeles Daily News, 11/28/06

3. Medicaid covers the poor only if they are - Children Currently caring for dependent children Pregnant Elderly People with severe and permanent disabilities “Parents and children” side of the program “Elderly and disabled” side of the program

4. Who’s left out? Adults without children Empty nesters

5. Topics to cover The federal exclusion of non-categorical adults Facts about uninsured, non-categorical adults Federal policy options 5

6. Part I The federal exclusion

7. What is the federal exclusion of non-categorical adults? Federal matching funds are limited to the categorically eligible States can obtain 1115 waivers, but Federal budget neutrality rules = no new money (at least in theory)

8. How many states cover non-categorical adults? Sources: Klein and Schwartz, 2008; Dorn, et al., 2005. Note: comprehensive programs provide (a) benefits at least as generous as typical ESI to (b) at least all adults up to 100% FPL.

9. The history of this exclusion Elizabethan Poor Law of 1601 Social Security Act of 1935 Medicaid’s creation in 1965 Medicaid’s subsequent evolution

10. In short: It is not clear how much thought federal policymakers gave to this Medicaid exclusion. Basic judgment underlying the exclusion: Able-bodied adults should be able to support themselves and so do not need federally-funded cash assistance. Judgment rendered In 1935 About cash assistance Can poor, able-bodied adults provide themselves with health coverage in 2008?

11. Part II Facts about uninsured, non-categorical adults

12. Low-income, non-categorical adults outnumber all uninsured children and all uninsured parents Source: KCMU/UI, October 2007.

13. More than half of all poor uninsured are non-categorical adults Total number: 16.6 million Source: KCMU/UI, October 2007.

14. Uninsured non-categorical adults, by age, income, and eligibility for Medicaid/SCHIP: 2004 (millions) Source: Holahan, et al., February 2007.

15. Uninsured, non-categorical adults broadly resemble other uninsured Total number: 25.5 million Total number: 25.5 million Source: KCMU/UI, October 2007.

16. Uninsured, non-categorical adults broadly resemble other uninsured (continued) Total number: 25.5 million Total number: 25.5 million Source: KCMU/UI, October 2007.

17. Percentage of adults ages 19–29 reporting going without various services because of cost, by health insurance status: 2005 Source: Collins, et al., 2007.

18. Impact of health insurance coverage on health status for adults ages 55–64, controlling for multiple factors: 1992–2000 Source: Hadley and Waidmann, 2006.

19. Effect of uninsurance on adults ages 55-64, controlling for multiple factors Uninsurance increases risk of death: From 7.5 percent to 10.5 percent among all adults age 55-64 From 9.4 percent to 14.1 percent in the lowest income quartile of such adults The lack of insurance among these adults Causes more than 13,000 deaths a year Is the third-leading cause of death, after cancer and heart disease Source: McWilliams et al., 2004

20. Part III Federal policy options

21. Assumption: for the poorest, uninsured, non-categorical adults, Medicaid is the policy vehicle 100% FPL = $851/month for an individual in ‘07 Median cost-sharing, non-group plans, ’06-07 Average PPO deductible - $1,747 Average co-pay - $28/$35, primary/specialty Effect of cost-sharing on indigent patients MN study - $1/$3 drug copays caused 52% of affected Medicaid beneficiaries to go without necessary medicine; among this group, 34% used the ER or were admitted to the hospital. RAND study – among low-income adults with hypertension, cost-sharing increased blood pressure, raising risk of death by 14% Quebec study – maximum $12/month copays for welfare recipients increased ER use by 78%, hospitalization/institutionalization/death by 88% California study – $1/visit copays in the 1970s increased inpatient utilization by 17% Sources: AHIP, 2006-2007 Individual Market Survey; M. Mendiola, et al., “Consequences of Tiered Medicaid Prescription Drug Copayments Among Patients in Hennepin County, Minnesota,” presented at Society of General Internal Medicine National Conference, May 2005; J. Gruber, The Role of Consumer Copayments for Health Care: Lessons from the RAND Health Insurance Experiment and Beyond, KFF, October 2006; Robyn Tamblyn, et al., “Adverse Events Associated with Prescription Drug Cost-Sharing among Poor and Elderly Persons,” JAMA 285(4): 421-429, January 2001; J. Helms, et al., “Copayments and the Demand for Medical Care: The California Medicaid Experience,” Bell Journal of Economics, 9:192-209, 1978.

22. For non-categorical adults at higher income levels, reasonable to consider other policy remedies Refundable, advanceable federal income tax credits Medicare buy-in for the near-elderly

23. Medicaid approach #1 – change budget neutrality requirements for waivers Policy variants Take Medicare savings into account Eliminate budget neutrality requirement for waiver coverage of poor adults Impact Waivers more useful than today - but Waivers are inherently limited Broader budget implications

24. Medicaid approach #2 – change Medicaid from categorical to purely income-based eligibility Advantages Administrative efficiency Equity Disadvantage – potentially eliminates current-law coverage Examples – nursing home coverage, families moving from welfare to employment, working disabled, near-poor kids, pregnant women, etc. In 2006, Medicaid coverage >150% FPL included 4.4 million non-elderly adults 6.4 million children Variation – Medicaid coverage up to threshold, state options to structure coverage above threshold (NASHP) Potential cost increase above income threshold

25. Medicaid approach #3 – add coverage of poor adults Idea All adults with incomes below a certain threshold receive Medicaid, regardless of category Other eligibility categories continue Disadvantages, compared to pure income-based eligibility Less efficiency savings Fewer equity gains Advantage - above income threshold, retains existing coverage without increasing costs

26. Medicaid policy questions, regardless of approach Optional or mandatory eligibility? Federal funding – standard or enhanced? If standard, limited state implementation or unfunded mandate If enhanced, many ways to deliver funds: Enhanced match for this category; Program-wide increase in federal funding; Higher federal match for dual eligibles; Uncapped FMAP or SCHIP-style state allotments; Etc. Financial eligibility Income Assets

27. Conclusion Low-income, non-categorical adults comprise the largest group of uninsured They suffer serious harm, particularly among older adults Serious policy design questions need to be answered in deciding how best to provide coverage 27