Medicaid Gap Leaves 6 Million Without Affordable Coverage
A significant piece of the Affordable Care Act (ACA) legislation is the Medicaid expansion, a provision that was originally meant to expand eligibility for the public program to include all people in the United States up to 133 percent of the Federal Poverty Level (FPL). This means that all individuals with annual incomes below $15,521 would be eligible for Medicaid, which is essentially free health coverage, minus nominal costs on out-of-pocket expenses.
Historically, Medicaid administration, including rules on eligibility requirements, was drastically different for each state. Therefore the expansion presented a major shift in policy and practice for many states. When the constitutionality of the law was taken to the Supreme Court, the court decided to allow states the decision to expand or opt out of the expansion, while the law itself was upheld. The result was a dead split; 25 states expanded Medicaid and 25 refused.
Since the ACA legislation anticipated that all states would expand Medicaid eligibility, it set a minimum income level to receive premium subsidies through the public exchanges. This minimum income level is 100 percent of the FPL, or an annual income of $11,670 in 2014. In states that expanded, all persons from 0-133 percent of the FPL will be covered by Medicaid and then those with additional income can purchase subsidized insurance on the individual market exchanges. In states that did not expand, eligibility for Medicaid ranges from 18-100 percent of the FPL for parents of dependent children, but non-parents are not covered at all. This leaves all individuals in non-expanding states who fall between the eligibility cap for Medicaid and 100 percent of the FPL without any federal assistance for health coverage.
Based on AIER’s Affordable Care Act Research Study estimates (see chart on right), this coverage gap leaves nearly 6 million people without affordable or subsidized health insurance coverage. One of the main goals of the ACA legislation was to insure the uninsured and provide assistance to those who could not afford coverage on their own. Now 5.2 million uninsured Americans are ineligible for Medicaid or federal subsidies and have annual incomes below $11,670.
The individual mandate requires all Americans to purchase health insurance but stipulates that if premium coverage exceeds 8 percent of their income they are exempt. So the people stuck in the coverage gap will not have to pay a penalty, but they also won’t be able to buy health insurance. The other 660,000 people in the coverage gap had previously bought insurance through the individual market where unsubsidized premiums in 2014 have increased substantially. This makes purchasing coverage burdensome and highly unlikely for this small group of previously insured low-income Americans.
The Medicaid gap could be solved by all states expanding the program. There has already been movement in non-expanding states to adopt the provision or implement an alternative expansion model to Medicaid, which would use federal funds to insure all or most of the “coverage gap” group. While this quirk in the law only presents a problem for a small minority of people, it is indicative of states’ conflicting attitudes towards the ACA and how that can undermine the conformity of the law.
To download a free copy of our Research Study, How the Affordable Care Act Affects Your Health Insurance Costs, visit AIER.org.