By Benjamin D. Sommers and Sara Rosenbaum
Health Affairs
February 2011
The Affordable Care Act will extend health insurance coverage by both expanding Medicaid eligibility and offering premium subsidies for the purchase of private health insurance through state health insurance exchanges. But by definition, eligibility for these programs is sensitive to income and can change over time with fluctuating income and changes in family composition. The law specifies no minimum enrollment period, and subsidy levels will also change as income rises and falls. Using national survey data, we estimate that within six months, more than 35 percent of all adults with family incomes below 200 percent of the federal poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within a year, 50 percent, or 28 million, will.
Income fluctuation raises issues for all subsidy-eligible individuals or families up to 400 percent of the federal poverty level, which includes those whose incomes place them squarely within the exchange system. For those purchasing coverage with subsidies through exchanges, income changes may trigger the obligation to repay some or all subsidies received; the amounts subject to repayment were significantly increased recently by Congress. But income fluctuations pose a particular challenge for individuals and families who cross the Medicaid-exchange divide, because this change may trigger a shift between plans and provider networks. In short, for this group, income fluctuation carries both financial and health care consequences.
Our multivariate analyses show that income fluctuations were common even among adults initially with incomes below the poverty level. This is particularly troubling because many of these people will often have incomes low enough to exempt them from the federal insurance mandate, which means that fatigue with frequent coverage changes may lead them to simply stop signing up for insurance over time. This is a problem on two fronts. First, it is uninsured low-income adults who have the most to gain from health reform. Second, this group includes millions of healthy adults whose participation in the exchanges is crucial to robust risk pools. We found that income changes were more common among adults who were younger, more educated, and whiteācharacteristics that correlate with a lower burden of illness. Indeed, these results are consistent with previous findings on changes in Medicaid coverage among adults.
http://content.healthaffairs.org/content/30/2/228.abstract
Comment:
By Don McCanne, MD
We have previously made the point that fluctuations in eligibility for Medicaid and for the income-related subsidies in the exchange plans create instability in coverage. Impaired outcomes occur because of gaps in coverage, and disruptions in provider networks. This new study puts a number on the degree of instability. Within one year, over 50 percent of adults with a family income under 200 percent of the federal poverty level (FPL) will experience a shift in eligibility from Medicaid to an insurance exchange, or vice versa.
The article discusses some of the implications of this, including problems with shifting eligibility levels for exchange subsidies for those with incomes over 200 percent of the FPL. Though eligible for one program or another, many individuals will have incomes that exempt them from the mandate to purchase insurance, and, assuredly, the healthier ones who are needed to round out the risk pools will go without coverage as a result of fatigue over multiple ejections by one program or another.
The authors offer policy options that might reduce this instability in coverage, but these options can never eliminate it. Our fragmented financing system of various private and public programs will never ensure that everyone is covered at all times, and it will continue to waste funds on administrative excesses such as trying to keep up with eligibility shifts due to income fluctuations.
A policy option that would work, not mentioned by the authors, would be to dump our dysfunctional multi-payer system and enact an improved Medicare that includes everyone. The problem of fluctuating incomes is greatly simplified because it impacts only the contribution through the tax system, without moving the individual in or out of Medicare.