The new donut hole: A barrier to universal coverage
A new category of uninsured Americans is emerging that is too rich for Medicaid and too poor for insurance exchange tax credits.
That’s in part because of the Affordable Care Act’s baseline for insurance subsidies and in part because of the Supreme Court ruling that Medicaid expansion is optional for the states, and it’s a significant shortcoming in the nation’s goal of universal insurance.
In the 22 states so far not expanding Medicaid nor considering it, those uninsured Americans — earning too much to meet the often-low pre-ACA Medicaid eligibility limits and too little to meet the 100 percent federal poverty level baseline for insurance subsidies — may total in the millions. Indeed, childless adults of any income level don’t even qualify for Medicaid and the limit for people with dependent children is quite low.
Among those 22 states, Medicaid eligibility limits for working adults with dependent children range from 23 percent FPL in Alabama to 200 percent FPL in Wisconsin, with the average being just under 60 percent FPL, or about $14,000 for a family of four.
For jobless adults with dependent children, those limits are in many states even lower — an average of 44 percent FPL, or about $10,500 for a family of four — ranging from 10 percent in Alabama to 200 percent in Wisconsin, with Texas, Florida, Louisiana and Missouri also having limits of less than 20 percent FPL.
By some estimates, more than 5 million uninsured Americans in those states would be eligible for Medicaid under the ACA’s expansion — but they’ll likely be left without any option.
Legally, in concept, those ineligible for Medicaid but making below 100 percent FPL — the threshold for insurance subsidies — could buy a health plan through the federal insurance marketplaces. But they probably wouldn’t receive any subsidy at all, not even the tax credit pegged at 100 FPL, the baseline for states that do not expand Medicaid, said Denise Rodriguez, an attorney with Foley & Lardner in Los Angeles.
“It is highly unlikely that those people would be able to afford coverage without the subsidy and, as a result, they would remain uninsured,” Rodriguez said.
Aside from Congress amending the law and offering tax credits to anyone below 400 percent of the federal poverty level or Republican-led states expanding Medicaid under the ACA, the only solution available to the donut hole is a federal waiver.
“I am optimistic that many states will change course and accept the Medicaid expansion,” David Blumenthal, MD, Commonwealth Fund President and the former National Coordinator for Health IT, said in a media release accompanying a report estimating that as many as two in five currently uninsured adults in states that decline Medicaid expansion may continue living without insurance.
“However, for states that don’t, it will be crucial for federal policymakers to look into legislative fixes that will allow the lowest-income residents in those states to purchase subsidized health insurance through their state marketplaces so they can benefit, like their better-off neighbors, from the protections available through the Affordable Care Act.”
[Infographic: Snapshot of pioneerig HIX landscape.]
Indeed, that is an option that the Department of Health and Human Services is looking to in a number of states, most notably Arkansas, which received the first federal approval for the so-called Private Option. Iowa is pursuing a similar plan, along with Pennsylvania and Michigan.
Under Michigan’s Medicaid expansion plan (still to be approved by HHS), beneficiaries earning between 10 percent and 133 percent of the federal poverty level will have to make a choice after 48 months: buying a private insurance plan on the exchange, or staying on Medicaid but with new co-pays.
For the 150,000 new enrollees earning between 100 percent and 133 percent of the federal poverty level, cost sharing of up to 5 percent of their annual income will begin after six months, and after 48 months, they’ll have to choose between increased cost sharing of up to 7 percent of their income or enrollment in a subsidized private exchange plan.
Those 22 states not expanding Medicaid are: In Alabama, Alaska, Florida, Georgia, Idaho, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming.
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