Can The Health Insurance System Handle Massive Medicaid Reductions?

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Imagine the constant threat of losing your health insurance. Before the pandemic, Medicaid participants in most states were suddenly ineligible if their income exceeded the eligibility threshold in a single month. As income can fluctuate due to seasonal, temporary or freelance work, this situation was unavoidable for many.

During the outbreak, due to public health emergency guidelines, monthly eligibility resets were temporarily suspended, and Medicaid coverage was expanded statewide. But those provisions, which took effect in April, could leave 15 million people excluded from Medicaid. It is not entirely clear whether these people will find a new method of protection. Their security will not be affected by the change.

We know that coverage breaches or changes can be upsetting and cause many problems, as people lose contact with their healthcare providers. Lack of coverage can discourage patients from seeking recommended care and lead to repeated visits to the emergency room, which can be more expensive than initially prescribed treatment.

It is relatively easy to understand how the United States experienced this increased and then decreased insurance coverage. As the federal government has increased Medicaid benefits to combat the pandemic, the extra money has come with a caveat: States can get it only if they waive reassessments, a law that requires members to opt out of Medicaid if their income exceeds income limits. a certain limit. As a result of this change, Medicaid enrollment increased by about 25 percent.

Thanks to these and other temporary social security policies, insurance coverage has remained stable during the pandemic. The number of uninsured people fell to 26.4 million in the first quarter of 2022, compared to 33 million uninsured in 2019.

For those who have lost or will soon lose Medicaid while monthly delays continue, as well as millions more who may lose coverage for other reasons, such as job losses, three recent policy changes will increase their chances of getting new coverage.

First, the IRA expands pandemic-related growth by expanding tax breaks provided through the Affordable Care Act (ACA). These tax credits support insurance for low- and moderate-income people who lack affordable work-related insurance coverage. This growth has contributed to the number of registered insured members: more than 16 million members in 2023, compared to 11 million members in 2020. Our work shows that increasing tax relief would attract at least 3 million of these newcomers.

Second, a recent federal rule corrects a longstanding exclusion that has made families with high-premium work-related insurance ineligible for federal assistance. The rule change now expands eligibility for the ACA tax credit to 5 million people.

And third, by early 2020, six states (Missouri, Nebraska, North Carolina, Oklahoma, South Dakota, and Utah) had begun offering Medicaid coverage under the ACA expansion or voted to do so in the near future. Data from health nonprofit KFF shows the policy would expand coverage to more than 400,000 people.

However, these are solutions for an incomplete system and still have many bugs First, the ACA tax credit is only available to people without work-related coverage. But employer insurance is cost-effective when employees have to contribute more than 9 percent of their income. Therefore, someone earning $20,000 would need to expect more than $1,800 in annual rewards to qualify for the ACA tax credit.

The same person is entitled to open market insurance if they are not entitled to employer insurance. Additionally, adults in the 10 states that did not expand Medicaid under the ACA, including Georgia, Florida and Texas, often lack affordable insurance options. Still, about 3.5 million people are affected by this coverage gap.

In the United States, the shift toward insurance will continue after the coming wave of Medicaid coverage cuts, as eligibility is based on income, employment status, age, location and other factors. But the moment underscores an ongoing problem in the U.S. health care system as more insurance policies are lost, switching between insurance companies disrupting health care delivery to individuals.

There are many good ways to reduce insurance losses. A simple solution might be to limit Medicaid eligibility to once a year instead of monthly. The Consolidated Benefits Act of 2023 took a step toward requiring states to provide Medicaid-eligible children with 12 months of continuous coverage, even if their family income changes. Higher income limits can reduce enrollees' risk of losing or regaining Medicaid eligibility because income is less likely to fluctuate as income increases.

Policymakers can provide additional assistance to people who lose Medicaid eligibility by funding consumer assistance programs that help people obtain new insurance coverage and, if necessary, apply for new benefits through the ACA's marketplaces. Increasing network adequacy requirements, which set criteria for the number of providers included in insurers' networks, can stabilize migration by reducing the likelihood of a provider leaving the network.

Politicians can provide additional assistance to low-income families who do not qualify for market-based tax credits. Laggard states can expand their Medicaid programs to reduce the risk of leaving affordable health insurance options, and many do: In 2014, 25 states did not expand coverage. That number is now down to 10. While the United States has made significant progress in expanding insurance coverage in recent years, policymakers should be careful not to fall behind, especially if temporary pandemic-era policies expire.

Christine Ebner is a senior economist and the Paul O'Neill Alcoa Chair in Policy Analysis at the nonpartisan, nonprofit RAND Corporation.

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