Medicaid and poor adults Who s left out How

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/ September 15, 2008 THE URBAN INSTITUTE

“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 THE URBAN INSTITUTE 2

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

Who’s left out? • Adults without children • Empty nesters THE URBAN INSTITUTE 4

Topics to cover 1. 2. 3. The federal exclusion of non-categorical adults Facts about uninsured, non-categorical adults Federal policy options THE URBAN INSTITUTE 5

Part I The federal exclusion THE URBAN INSTITUTE 6

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

How many states cover non-categorical adults? 1115 waivers Less than comprehensive 9 states: AZ, 3 states: DC, DE, HA, ME, MA, NM, NY, OR, VT Comprehensive State-only funds MN, WA 12 states: AR, 1 state: PA DC, IA, ID, IN, MD, MI, MO, MT, OK, TN, UT 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. THE URBAN INSTITUTE 8

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

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

Part II Facts about uninsured, non-categorical adults THE URBAN INSTITUTE 11

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

More than half of all poor uninsured are non-categorical adults Total number: 16. 6 million Source: KCMU/UI, October 2007. THE URBAN INSTITUTE 13

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

Uninsured, non-categorical adults broadly resemble other uninsured Total number: 25. 5 million Source: KCMU/UI, October 2007. Total number: 25. 5 million THE URBAN INSTITUTE 15

Uninsured, non-categorical adults broadly resemble other uninsured (continued) Total number: 25. 5 million Source: KCMU/UI, October 2007. THE URBAN INSTITUTE 16

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

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

Effect of uninsurance on adults ages 55 -64, controlling for multiple factors • Uninsurance increases risk of death: v. From 7. 5 percent to 10. 5 percent among all adults age 55 -64 v. From 9. 4 percent to 14. 1 percent in the lowest income quartile of such adults • The lack of insurance among these adults v. Causes more than 13, 000 deaths a year v. Is the third-leading cause of death, after cancer and heart disease Source: Mc. Williams et al. , 2004 THE URBAN INSTITUTE 19

Part III Federal policy options THE URBAN INSTITUTE 20

Assumption: for the poorest, uninsured, noncategorical adults, Medicaid is the policy vehicle • 100% FPL = $851/month for an individual in ‘ 07 • Median cost-sharing, non-group plans, ’ 06 -07 v. Average PPO deductible - $1, 747 v. Average co-pay - $28/$35, primary/specialty • Effect of cost-sharing on indigent patients v. 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. v. RAND study – among low-income adults with hypertension, cost-sharing increased blood pressure, raising risk of death by 14% v. Quebec study – maximum $12/month copays for welfare recipients increased ER use by 78%, hospitalization/institutionalization/death by 88% v. California study – $1/visit copays in the 1970 s 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. THE URBAN INSTITUTE 21

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 THE URBAN INSTITUTE 22

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

Medicaid approach #2 – change Medicaid from categorical to purely income-based eligibility • Advantages v. Administrative efficiency v. Equity • Disadvantage – potentially eliminates current-law coverage v. Examples – nursing home coverage, families moving from welfare to employment, working disabled, near-poor kids, pregnant women, etc. v. In 2006, Medicaid coverage >150% FPL included Ø 4. 4 million non-elderly adults Ø 6. 4 million children • Variation – Medicaid coverage up to threshold, state options to structure coverage above threshold (NASHP) v. Potential cost increase above income threshold THE URBAN INSTITUTE 24

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

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

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 THE URBAN INSTITUTE 27