By John Reichard, CQ HealthBeat Editor
April 23, 2013 -- Advocates for the poor are alarmed that if states do not expand their Medicaid programs under the health care law, millions of uninsured Americans will continue to go without coverage next year.
There's no doubt that's true. But the size of the group that will go without isn't as big as one might think. Why? Because of a provision of the health care law that received almost no attention before the Supreme Court ruled last year that states have the right to opt out of the Medicaid expansion.
At issue is a category of uninsured adults with annual incomes between 100 percent and 138 percent of the federal poverty line. The health care law says this group qualifies for federal subsidies to buy coverage on the insurance exchanges, which are set to begin enrolling people on Oct. 1.
That was a surprise to many analysts who had been closely following the health care law and its provisions to expand coverage for the poor under Medicaid, and for those with higher incomes, through federal subsidies in the form of refundable tax credits. Such assistance is designed to help consumers afford the premiums for coverage in the new marketplaces.
As originally written, the law (PL 111-148, PL 111-152) specified that those without access to affordable coverage who had incomes below 138 percent of the federal poverty line would be covered through the Medicaid expansion, which was expected to happen in every state. Between 138 percent and 400 percent of the poverty line, people without affordable coverage would go to exchanges where they could sign up for a health plan whose premium charges would be offset by the subsidies, which would be based on a sliding income scale.
Few predicted the scenario that actually came to pass: that the high court would strike down the requirement that states expand their Medicaid programs but keep subsidies in place for those between 138 percent and 400 percent of poverty.
So, until the justices ruled, scant attention was paid to the fact that the law also provided that uninsured adults with incomes between 100 percent and 138 percent of the poverty line would be able to go to exchanges if their states did not expand Medicaid. Now, with up to half of the states possibly not expanding their programs next year, the importance of the subsidies available to that group is magnified.
One question that has surfaced is how the 100 percent to 138 percent group ever came to be. If people assumed that states would be required under the health care law to expand Medicaid, why did the law include federal subsidies for the 100 percent to 138 percent group in states that did not expand their Medicaid programs?
The answer, analysts say, appears not to be a hedge in case the Supreme Court did the unexpected and made Medicaid expansion optional. Rather, it appears that drafters originally planned that those eligible for exchange subsidies would have to have incomes between 100 percent and 400 percent of the federal poverty line.
Those devising the law only switched the income cutoff to between 138 percent and 400 percent because they needed to get a lower overall score of the cost of the health care law from the Congressional Budget Office and creating a larger Medicaid expansion group brought down the cost.
Many basic questions about that group have remained unanswered until recently. For example, how many people does it include? What percentage is this group of the overall Medicaid expansion population? How will the coverage in the exchanges for people in the 100 percent to 138 percent category compare with what they would have been entitled to had their state expanded Medicaid? What percentage of those in that income group that will be eligible for subsidized coverage on the exchanges actually sign up? And will those enrolling in private plans through the new marketplaces have better or worse access to doctors and hospitals than they would have under a Medicaid expansion?
Definitive numbers aren't yet available to answer these questions. But based on interviews with knowledgeable analysts, the availability of subsidies for the income group between 100 percent and 138 percent of poverty eases the hit of a decision by a state not to expand Medicaid. However, people in this category will have to pay higher out-of-pocket charges for coverage than if their state expands its Medicaid program. Already struggling to pay their bills, at least a sizable minority of them may not sign up for coverage through the exchanges. And many millions of the neediest, and arguably most deserving, uninsured will continue to go without coverage under the overhaul—even as their higher-income counterparts qualify for federal help to get insurance.
Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation, estimates that there are 5.3 million uninsured adults nationwide with annual incomes between 100 percent and 138 percent of poverty. She also says there are about 20.1 million uninsured adults with incomes below 138 percent of poverty, so about a quarter of the potential Medicaid expansion population under the health care law could still get subsidized exchange coverage, even if none of the states expanded their Medicaid programs. Of course, some will and some won't, but those national figures give at least a rough idea of the importance of the 100 percent to 138 percent category in any state.
States have nothing to do with whether someone gets a subsidy; that's between the individual and the federal government. But while the subsidies are considered generous, they do not cover all premium costs. Tolbert says people in the 100 percent to 138 percent group will have to pay premiums of up to 2 percent of their annual incomes. So an individual with an annual income right at the poverty line, or 100 percent of poverty, would be on the hook for $229 per year in premiums, or about $19 per month, Tolbert says.
Extra Subsidies Available
Also, if they get private coverage on the exchange, these consumers would have to pay out of pocket for things like deductibles and copayments. On the other hand, the 100 percent to 138 percent group would get subsidies to cover those out-of-pocket charges in addition to the refundable tax credits they get to help pay premiums. How much of a subsidy for out-of-pocket charges other than premiums? Tolbert says the subsidy would be such that their coverage had an actuarial value of 93 percent. That means that, on average, they would be on the hook for 7 percent of the costs of services covered by their plan, which would pick up the other 93 percent.
If the state expanded its Medicaid program, however, those in the 100 percent to 138 percent of poverty would not have to pay any premiums. Also under the Medicaid expansion, it's up to each state to decide whether to require people in this group to pay anything out of pocket when they go to a doctor or hospital.
So under the health care law, coverage for the 100 percent to 138 percent group does come with some strings attached—namely some potential out-of-pocket charges.
Ron Pollack, executive director of Families USA, says that while those charges might seem minimal, they may be beyond the reach of people at or around the poverty line who simply don't have enough money to pay the existing bills they already face. So Pollack questions how many people who can get coverage on exchanges in the 100 percent to 138 percent group actually will do so.
That means even though up to 25 percent of the Medicaid expansion population will qualify for insurance funded by the health care law even if their states choose not to expand Medicaid, the proportion who actually get it could be far lower than one in four.
However, Matt Salo, executive director of the National Association of Medicaid Directors, has a different take. He says people at the poverty line and somewhat above have access to other forms of federal assistance in many instances. Their incomes might be low, but so too are the out-of-pocket charges they would have to pay, he says.
"These people don't have zero money. They are working, they have income. I think it's a stretch to say they would walk away from it," Salo says. As a matter of "total speculation," Salo says up to three-quarters of those who would qualify for subsidies to buy private coverage on exchanges would potentially do so.
Tolbert declines to make any predictions on that score. On the one hand, she notes the difficulty of paying $19 per month when people have low incomes and face other bills. On the other hand, she notes that people in the 100 percent to 138 percent group may be particularly motivated to pay the $19 per month and the other out-of-pocket charges they face if they'll have to pay health care law penalties for being uninsured. The Department of Health and Human Services is in the rule-making process on the question of whether penalties will be charged to that income group.
Will Care Be Available?
Coverage is one thing, but access to actual care is another. Access to providers in Medicaid can be more of a problem than if one has private coverage.
Salo says access to providers will be the same in private coverage regardless of one's income. That could be a plus, then, if one has coverage obtained through the exchange and access to doctors in the traditional Medicaid program in one's state is problematic.
"They'll all be in the same plan," he says of those who get private coverage on the exchange. "People at 100 percent of poverty with maximum subsidies and people at 400 percent of poverty with minimal subsidies, and potentially people at 800 percent of poverty with no subsidies, will all be in the same plan, will all have the same card and will all have the same ease or difficulty in actually seeing doctors," Salo says.
Tolbert says not everyone agrees that that's the case, however. There's a requirement that plans offered in exchanges include essential community providers, she acknowledges. "But I think there is still some concern" that the providers in a plan may not be located near low-income enrollees who don't have the same access to transportation that those with higher incomes do.