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Panelists Discuss Overhauling Medicaid to Cover Low-Income Adults

By Leah Nylen, CQ Staff

September 15, 2008 -- More than half of Americans without health insurance are low-income adults who do not qualify for Medicaid, and the entitlement program would need a significant overhaul if it were to cover that non-eligible group, according to experts at a health panel Monday.

Low-income adults who are ineligible for Medicaid make up a greater number of the uninsured than uninsured parents or children, according to a report recently released by the AARP Public Policy Institute. Of those low-income adults, nearly 80 percent are employed and U.S. citizens. Under current law, people who are eligible for Medicaid must be pregnant, disabled, currently caring for a dependent child, or over age 65. States can apply for a waiver to provide Medicaid coverage to uninsured adults, but the application process is cumbersome and the federal government does not offer any additional funding for coverage of adults, according to Stan Dorn, a research associate at the Urban Institute and author of the AARP report, which was discussed at the session sponsored by the Alliance for Health Reform.

The age groups that make up the majority of the low-income non-eligible class are young people 18-29 and the near elderly between 50 and 64, Dorn said.

"A lot of well-informed people think that as messed up as the health [system] is, at least the poor have Medicaid. But that's not the case," Dorn said. "If you don't fit into one of the categories, you can't get Medicaid no matter how poor you are."

Nearly half—46 percent—of Americans believe that providing coverage for the uninsured is the most important health care issue facing the next president, according to Gary Ferguson, a senior vice president with polling firm American Viewpoint.

When asked about various options for increasing health care coverage, 68 percent of those polled believe the federal government should expand Medicaid to cover more low-income Americans, said Ferguson, citing a February 2008 public opinion survey conducted by American Viewpoint for the Federation of American Hospitals.

Possible Approaches

If the federal government chose to expand Medicaid to low-income adults, three approaches emerge as the most viable, Dorn said.

Under the first, the federal government could keep the current process—where states must apply for a waiver to cover low-income adults—but lift the budget neutrality provision. This would potentially allow states a greater share of federal matching funds, Dorn said.

Barbara Coulter Edwards, a principal with Health Management Associates and former director of Ohio's Medicaid program, cautioned that such a proposal could put an additional financial burden on states, which already have been struggling to meet their commitments to Medicaid.

The big question is "whether or not states can commit to covering a large number of uninsured when they already are having problems meeting [expectations]," Edwards said. "States have to balance budgets . . . [and] Medicaid is countercyclical. When the economy is the worst, the demand is the greatest. In the last recession, several states began to back away from eligibility expansions they put in place because they had to balance their budgets."

A second option would be to eliminate the categorical eligibility requirements and simply base Medicaid eligibility on income level. However, panel members warned that this solution could lead to a loss of coverage for some groups that currently qualify, such as pregnant women.

Nina Owcharenko, a senior policy analyst with the Heritage Foundation's Center for Health Policy Studies, noted that for the past several years, Congress has tried to expand health care eligibility for uninsured children. Because of budgetary constraints, it probably would not be possible to expand health care for uninsured children and these low-income adults, she said.

"Policymakers will have to debate: do we want to expand coverage for childless adults or uninsured children and middle class families?" Owcharenko said. "The real challenge will emerge when [we begin] tackling those trade-offs."

The third approach would be to create a new Medicaid eligibility category for all adults with incomes below a certain level. The biggest advantage of this approach, Dorn said, would be that it would not remove coverage from anyone who is currently eligible. However, creating new categories would add more administrative work for states and could require more money.

Although the American Viewpoint poll showed Americans were concerned with the number of uninsured, Owcharenko noted that some people might be less inclined to support specific proposals if they required higher taxes.

"People are concerned with the amount of taxes they have to pay. You have to keep it in context," Owcharenko said. "How much [are] Americans willing to pay for certain reforms?"

Edwards also observed that states have begun to worry about the cost of maintaining Medicaid even in its current form.

"Sustaining Medicaid is going to compete with efforts to use Medicaid to expand to cover working uninsured populations," he said.

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