AARP Public Policy Institute INSIGHT on the Issues After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults Lynda Flowers, JD, MSN, RN AARP Public Policy Institute Matthew Buettgens, Ph.D. The Urban Institute The Affordable Care Act required states to expand their Medicaid programs to cover more low-income people, including midlife adults.1 However, a recent U.S. Supreme Court decision, while upholding the rest of the health reform law, effectively turned the mandate into a state option. This Insight on the Issues examines the Court’s decision and how uninsured midlife adults in states that take up this option could benefit. The ACA Medicaid Expansion Supreme Court Challenge to the Medicaid Expansion The Affordable Care Act (ACA)—the health reform law enacted in 2010— Twenty-six states challenged the required all states to expand their constitutionality of the mandatory Medicaid programs to cover individuals Medicaid expansion in the U.S. Supreme under age 65 with income at or below Court.6 The states collectively argued that 138 percent of the federal poverty level the penalty for not complying with the (FPL). 2,3 Beginning in 2014, states can mandate—the possible loss of all federal receive 100 percent federal funding for Medicaid funding for their entire covering these newly eligible individuals programs—was a coercive use of federal for three years. Beginning in 2017, the power and therefore unconstitutional. federal portion will gradually phase down to 90 percent by 2020. Accepting the coercion argument, the Court ruled that while federal lawmakers Newly eligible individuals are those have the authority to expand Medicaid, whose income does not exceed they may not impose the threat of losing 133 percent of the FPL; who are between all federal Medicaid funding on states age 19 (or a higher age that the state has that elect not to do so. 7 In making this elected) and age 65; who are not pregnant; ruling, the Court effectively created a and who, as of December 1, 2009, were state option to expand Medicaid in return not eligible for full Medicaid benefits for enhanced federal funding. under a state plan or a waiver.4,5 To enforce this new mandate, the ACA gave States at the Crossroads the Secretary of Health and Human Services It is now up to each state to decide whether authority to withhold all federal Medicaid to expand its Medicaid program to cover funding for their entire program from states low-income people who are currently that did not take up the Medicaid expansion. uninsured. There are several reasons why After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults taking advantage of the Medicaid expansion The majority of those in this age group can be a win-win proposition for uninsured who would gain access to coverage low-income midlife adults and for states. through Medicaid are single adults with Some of them are described below.8 no dependents (52 percent), and over half (53 percent) are women. Most have The focus of this Insight on the Issues is a high school education or less on midlife adults. However, there are (approximately 68 percent). 13 many reasons why states should take up the Medicaid expansion for low-income uninsured adults of all ages. These have Millions of Uninsured Midlife Adults been well documented elsewhere. 9 Would Gain Access to Care at a Time in Their Lives when They Can Most Benefit Characteristics of Midlife Adults Likely to Benefit from the Between 2006 and 2011, there was a Medicaid Expansion 15 percent increase in uninsured adults ages 45–64, going from 14.2 percent in 2006 to About 4 million low-income adults ages 16.3 percent in 2011.14 This increase 45–64 who currently lack insurance reflects, in part, the rise in unemployment would gain access to Medicaid under the during the recent economic recession expansion. 10 In Table 1, we show how (figure 2) and the associated lack of many uninsured midlife adults would employer-provided health insurance gain access to Medicaid in each state. 11 coverage. Once they become unemployed, older workers are out of work longer than Approximately 60 percent of those in their younger counterparts, with an average this group are non-Hispanic whites. duration of unemployment in January 2013 However, non-Hispanic blacks and of 43.8 weeks (compared to 32 weeks for Hispanics represent a significant the younger age group).15 proportion of those who would gain access to insurance through a Medicaid expansion (approximately 18 and Figure 2 U.S. Unemployment Rate Age 45–64, 16 percent, respectively) 12 (figure 1). 2006–2012 10% Figure 1 Percent Unemployed Uninsured Adults Under 138 Percent 8% of Poverty Newly Eligible for 6% Medicaid by Race 4% All Nonelderly Ages 45-64 2% White, Non-Hispanic 0% 2006 2007 2008 2009 2010 2011 2012 Year Black, Non-Hispanic Source: AARP calculation from the Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey Annual Averages, 2006–2012 (numbers in thousands). Hispanic These uninsured adults would likely Other Race/Ethnicity benefit from an expansion, because the prevalence of chronic conditions 0% 20% 40% 60% 80% increases during midlife. This is Source: AARP analysis of Urban Institute estimates based on analysis of American Community Survey Records, 2008, 2009, especially the case for those with low and 2010 (adults only). incomes. 16 We estimate that 11 percent 2 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults of the midlife adults who would gain the program to pay for LTSS, like access to Medicaid would be in fair to home- and community-based LTSS, poor health. 17 personal care, home health care, and institutional long-term care. 19 Uninsured people with chronic illnesses are less likely to receive the care they As the primary payer for LTSS for need to manage their health conditions low-income adults, states have a than their insured counterparts. They are unique opportunity to expand their also more likely to have worse clinical Medicaid programs to give low- outcomes when they finally do receive income midlife adults—who tend to treatment for their conditions—typically have multiple chronic illnesses— in expensive emergency rooms. 18 access to care that has the potential to improve or maintain their health status, Having Medicaid would give uninsured long before their conditions deteriorate low-income adults who are in their to the point where they are likely to middle years access to the treatments need costly Medicaid-financed LTSS, and services they need to help them in addition to their Medicare benefits. manage, monitor, and better control their chronic conditions. Of the 4 million  States that expand Medicaid early uninsured midlife adults who would gain can realize the biggest savings. access to Medicaid, 1.5 million are States that expand their programs employed. The security of Medicaid beginning in 2014 will receive coverage would help them maintain greater financial advantage than employment. Midlife adults who are those that expand in later years for unemployed because they are in poor two reasons. First, the federal health would benefit from Medicaid government will pay 100 percent of coverage. The ability to improve their the cost of care for the expansion health status could increase their ability group until the end of 2016. Second, to re-enter the labor force. for a population that is likely to have “pent-up” demand for health care, 20  States that invest in the health of costs associated with getting their uninsured low-income adults health conditions under control will during their middle years might be covered 100 percent by federal realize significant benefits when dollars between 2014 and the end of these individuals become eligible 2016. 21 For states that offer coverage for Medicare. Most people become in 2014, by the time they are eligible for Medicare once they reach required to begin paying a portion of age 65. Low-income adults who are the expansion costs in 2017—which on Medicare are also likely to become is phased in over four years and does dual eligibles—which means they not exceed 10 percent of the total will depend on Medicare for their cost of the coverage—beneficiary primary and acute health needs costs should be considerably less. 22 (hospital, physician services, laboratory and x-ray services) and on  Expanding Medicaid will give Medicaid for help with their Medicare uninsured midlife adults access to cost sharing and their long-term potentially lifesaving preventive and services and supports (LTSS) needs. screening services and could reduce disparities. People without health Traditionally, dual eligibles have insurance are far less likely to access been among the sickest, poorest, and recommended preventive and screening costliest Medicaid beneficiaries, services—such as flu shots, cholesterol many of whom end up depending on 3 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults screening, mammograms, and colorectal 8 percentage points less likely to have cancer screening—than their insured health insurance coverage; and counterparts.23 The ability to access Hispanics are 19 percentage points prevention and health screenings means less likely to have such coverage. An that people can avoid contracting certain Urban Institute study found that the illnesses and/or have their conditions Medicaid expansion coupled with diagnosed and treated much earlier— premium tax credits available to when they are less costly to a state’s people through health insurance uncompensated care system. For marketplaces could reduce these example, colorectal cancer is largely disparities by more than half for non- preventable through screenings to detect Hispanic blacks, and by almost one- noncancerous polyps. Experts quarter for Hispanics. 25,26 recommend that adults begin screening at age 50. Yet, many adults forgo the test Racial and ethnic disparities in the because of cost. Having access to use of prevention and screening Medicaid would eliminate this barrier services persist notwithstanding for millions of low-income adults, and health insurance status. However, help states avoid the high studies among African Americans uncompensated care costs associated and Hispanics find an association with treating advanced cancers. between health insurance and increased receipt of preventive care. Because Medicaid requires These studies also find that insurance beneficiaries to pay only nominal status increases the likelihood of cost sharing when they receive having a regular source of care, services, states that take up the which also improves one’s chances expansion may increase the of receiving preventive services. 27 likelihood that low-income people Thus, expanding Medicaid could will take advantage of recommended have a positive impact on reducing preventive and screening services. In disparities in the use of prevention addition to providing access to and screening services. prevention and screening through a Medicaid expansion that is largely  Making Medicaid available to low- federally financed, states can reduce income adults who are uninsured their financial exposure by an during their middle years can help additional percentage point by taking ensure that they are able to meet advantage of a provision in the ACA basic needs as they age. A study of that allows them to elect an option to low-income uninsured adults in eliminate cost sharing for certain Oregon found that those who received preventive and screening services. 24 Medicaid experienced more financial While this may not seem like much security than their uninsured of a saving, states should carefully counterparts. Those with Medicaid consider the health and financial were 40 percent less likely to report consequences of not maximizing borrowing money or skipping opportunities to provide access to payments on other bills because of prevention and screening services. medical expenses. They were also 25 percent less likely to have unpaid Finally, taking up the Medicaid medical bills that were sent to a expansion could have a positive collection agency. 28 These findings impact on reducing disparities among suggest that having Medicaid is critical midlife uninsured adults. Compared to ensuring that low-income adults are to whites, non-Hispanic blacks are able to meet their basic needs. 4 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults Conclusion Medicaid, thus reducing the burden of uncompensated care at a time when The option to expand Medicaid gives hospitals’ funding for such care will be states a cost-effective way to improve substantially reduced. 32 the health status of uninsured low- income people at a time in their lives In addition to saving lives and state when they are most likely to be uncompensated care dollars, 33 states that developing chronic health conditions expand Medicaid are likely to such as diabetes, heart disease, and experience significant economic stroke—conditions that, left untreated, benefits, including job growth and can result in costly deteriorations in increased income and state tax health status and premature death for revenues. 34,35 For example, in 2009, these individuals, and millions of dollars 6 percent of full-time jobs in Arkansas in uncompensated care costs for states. 29 were generated by the Medicaid In fact, Medicaid expansions in three program. In addition, Arkansas officials states—Arizona, Maine, and New estimate that the state economy will be York—were associated with significant hundreds of millions of dollars larger if decreases in mortality, especially among it opts to expand Medicaid, resulting in a vulnerable populations, compared with positive impact on state tax revenue. 36 neighboring states that did not expand Medicaid coverage. 30,31 In addition, In deciding whether to expand their hospitals are facing significant cuts to Medicaid programs, states should their disproportionate share hospital carefully consider the positive impact of (DSH) payments—federal dollars that an expansion on the health, well-being, help fund uncompensated care for the and longevity of their low-income uninsured. These hospitals stand to citizens who are in their middle years realize significant gains if states expand and find themselves uninsured. 5 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults Table 1 Current Uninsured under 138% FPL that Gain Medicaid Eligibility Under the Expansion Ages 45–64 All Nonelderly Total 4,003,647 13,804,538 Alabama 80,144 298,637 Alaska 11,826 44,762 Arizona 18,642 64,558 Arkansas 53,081 200,841 California 535,567 1,756,185 Colorado 63,723 201,770 Connecticut 25,667 81,966 Delaware 2,144 6,801 District of Columbia 5,105 16,979 Florida 379,327 1,164,916 Georgia 173,952 629,912 Hawaii 12,438 37,960 Idaho 26,398 97,249 Illinois 152,989 503,581 Indiana 85,562 330,931 Iowa 25,172 88,463 Kansas 30,442 118,002 Kentucky 69,316 256,296 Louisiana 88,954 305,558 Maine 14,187 40,170 Maryland 47,298 160,402 Massachusetts 23,106 80,869 Michigan 146,468 520,246 Minnesota 34,611 122,626 Mississippi 57,697 210,747 Missouri 86,078 320,084 Montana 20,893 58,212 Nebraska 19,173 71,361 Nevada 43,991 139,331 New Hampshire 13,876 43,172 New Jersey 83,329 269,817 New Mexico 41,287 132,356 New York 38,382 127,308 North Carolina 146,882 514,026 North Dakota 5,870 21,804 Ohio 163,170 540,993 Oklahoma 57,220 212,255 Oregon 66,155 224,477 Pennsylvania 132,543 459,582 Rhode Island 9,543 32,455 South Carolina 85,390 272,836 South Dakota 12,149 40,057 Tennessee 108,785 334,731 Texas 427,566 1,659,778 Utah 21,414 95,883 Vermont * 774 Virginia 89,278 315,541 Washington 75,444 270,854 West Virginia 32,144 113,900 Wisconsin 51,841 168,650 Wyoming 7,429 23,878 Source: ACS 2008–2010, Weighted to 2012 * Very small sample size. 6 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults Endnotes 1 For purposes of this Insight on the Issues, midlife adults refer to adults ages 45 to 64. 2 The law technically requires states to cover all individuals with income at or below 133 percent of the federal poverty level. But because the law eliminates historical income disregards for these new groups and establishes a new across-the-board 5 percent income disregard, the effective income eligibility threshold is 138 percent of the FPL. L. Flowers, Health Reform Provides New Federal Money to Help States Expand Medicaid (Washington, DC: AARP Public Policy Institute, 2010). 3 The federal poverty guidelines (commonly referred to as the federal poverty level or FPL) are one version of the federal poverty measure. They are issued each year in the Federal Register by the Department of Health and Human Services (HHS). The guidelines are used for administrative purposes—for instance, to determine financial eligibility for certain federal programs. U.S. Department of Health and Human Services, 2012 HHS Poverty Guidelines, Federal Register Notice, January 26, 2012, http://aspe.hhs.gov/poverty/12poverty.shtml. 4 L. Flowers, Health Reform Provides New Federal Money. 5 States that were already providing comprehensive health coverage to parents and childless adults with income up to 100 percent of the FPL when the ACA was enacted are called “expansion states” and will initially receive less federal assistance than states that did not previously extend such coverage. However, by 2019, the federal Medicaid assistance percentage (FMAP) for these states will be equal to the enhanced FMAP available for the newly eligible adults. 6 The states were Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming. A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion (The Henry J. Kaiser Family Foundation, August 2012). 7 Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. __, 132 S. Ct. 2566 (2012). 8 Other reasons exist. This Insight on the Issues presents those that are most relevant to midlife uninsured adults. 9 See, for example, J. Perkins, 50 Reasons Medicaid Expansion is Good for Your State (Carrboro, NC: National Health Law Program, 2012). 10 Urban Institute estimates based on three-year merge of data from the American Community Survey, (2008–2010), weighted to 2012. 11 Estimates in Table 1 are based on the 2008, 2009, and 2010 ACS combined. We computed MAGI based on the detailed income components available on the survey and used the HHS Poverty Guidelines to determine those with family MAGI below 138 percent of poverty. Immigration status was imputed based on the methodology of Jeff Passel. Current eligibility for Medicaid was assessed using a model developed at the Urban Institute that takes into account each state’s eligibility rules and groups people into the units that would be used to determine eligibility. 12 Urban Institute estimates based on analysis of the ACS, 2008–2010 records. 13 Urban Institute estimates based on analysis of the ACS, 2008–2010 records (adults only). 14 AARP calculation based on Current Population Survey Data from March 2006 to March 2012, February 4, 2013. 15 S. Rix, The Employment Situation January 2013: Jobs Added to the Economy but Unemployment Holds Steady (Washington, DC: AARP Public Policy Institute, February 2013). 16 National Center for Health Statistics, Health, United States, 2011: With Special Feature on Socioeconomic Status and Health (Hyattsville, MD: National Center for Health Statistics, 2012). 17 Urban Institute estimates based on three-year merge of data from the ACS (2008–2010) (adults only). 18 Institute of Medicine, Care without Coverage: Too Little, Too Late (Washington, DC: National Academy Press, 2002). 7 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults 19 K. Young et al., Medicaid’s Role for Dual Eligible Beneficiaries (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, April, 2012). 20 The Henry J. Kaiser Family Foundation, Expanding Medicaid to Low-Income Childless Adults under Health Reform: Key Lessons from State Experiences (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, July 2010). 21 L. Flowers, Health Reform Provides New Federal Money. 22 Ibid. 23 Institute of Medicine, Care without Coverage. 24 L. Flowers and W. Fox-Grage, Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars (Washington, DC: AARP Public Policy Institute, 2011). 25 Health insurance marketplaces are central locations where qualified individuals (e.g., those without access to other health insurance coverage) can go to purchase coverage. Premium tax credits are available in the marketplace to help make health insurance premiums more affordable to qualifying individuals. For more information, see G. Smolka and S. Sinclair, The Creation of American Health Benefit Exchanges (Washington, DC: AARP Public Policy Institute, March 2011). 26 L. Clemans-Cope, G. M. Kenney, M. Buettgens, C. Carroll, and F. Blavin, “Health Reform Could Greatly Reduce Racial and Ethnic Differentials in Insurance Coverage,” Health Affairs 31, no. 5, 920–930. 27 Institute of Medicine, Care without Coverage. 28 K. Baicker and A. Finkelstein, “The Effects of Medicaid Coverage—Learning from the Oregon Experiment,” New England Journal of Medicine 365, no. 8 (August 25, 2011). 29 Uncompensated care is medical care received, but not fully paid for, either out-of-pocket by individuals or by a private or public insurance payer. The cost of unpaid care is estimated by using the benchmark of what would have been paid for the services by private insurance. J. Hadley and J. Holahan, The Cost of Care for the Uninsured: What Do We Spend, Who Pays, and What Would Full Coverage Add to Medical Spending? Issue Update (Washington, DC, Kaiser Commission on Medicaid and the Uninsured, 2004). 30 Adults ages 35 to 64, minorities, and residents of poor counties experienced the greatest reductions in mortality. B. Sommers, K. Baicker, and A. Epstein, “Mortality and Access to Care among Adults after State Medicaid Expansions,” New England Journal of Medicine 367, no. 11 (September 13, 2012):1025–34. 31 University of Arkansas Sam M. Walton College of Business, The Economic Impact of Medicaid Spending in Arkansas (Fayetteville, AR: University of Arkansas Sam M. Walton College of Business, May 2010). 32 The DSH cuts were premised on an expected increase in insurance coverage through the health insurance exchanges and expanded Medicaid eligibility. If that careful balance is disrupted because states do not expand their programs, millions will remain uninsured and continue to rely on safety net hospitals for care at a time when the hospitals will see their funding for uncompensated care diminish. 33 It is estimated that states and localities will experience $18 billion in Medicaid savings on uncompensated care. J. Holahan et al., The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, November 2012). 34 C. Marks and R. Rudowitz, The Role of Medicaid in State Economies: A Look at the Research (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, 2009). 35 Some argue that the economic gains associated with expanding Medicaid are diminished by the fact that individuals who were eligible but not enrolled in the program pre-expansion (mostly children), will be identified and enrolled in Medicaid. However, research suggests that other ACA policies will drive this phenomenon whether or not states take up the expansion. This same research found that states are likely to realize net savings from the expansion, even with new enrollment of those where were previously eligible but not enrolled. J. Holahan et al., The Cost and Coverage Implications of the ACA Medicaid Expansion. 8 After the Supreme Court Decision: The Implications of Expanding Medicaid for Uninsured Low-Income Midlife Adults 36 Testimony of Andrew Allison, Ph.D. Director, Division of Medical Services, Department of Insight on the Issues No. 72, January, 2013 Health Services, State of Arkansas, before the Committee on Energy and Commerce Subcommittee on Health, U.S. House of AARP Public Policy Institute Representatives, “State of Uncertainty: 601 E. Street, NW, Washington, DC 20049 Implementation of PPACA’s Exchanges and www.aarp.org/ppi INSIGHT on the Issues Medicaid Expansion,” December 13, 2012, 202-434-3890, ppi@aarp.org accessed at http://energycommerce.house.gov/ © 2013, AARP. sites/republicans.energycommerce.house.gov/ files/Hearings/Health/20121213/HHRG-112- Reprinting with permission only. IF14-WState-AllisonA-20121213.pdf. 9