For much of the past two years, enrollment in the Medicaid and CHIP programs has been declining. In May, 2017, enrollment in both programs was 74.6 million people. As of May of this year, enrollment had declined by 2.5%, to 72.8 million. This decline has applied across the board, in almost every state, for adults and for children.
Superficially, this might make sense; after all, the economy is strong and unemployment is at a 50-year low. But digging into the numbers shows that the strong economy is only one reason for enrollment declines. In fact, the overall uninsured rate in the United States has also increased during this same time period. One would think that the strong economy would not only cause enrollment declines in Medicaid and CHIP but also cause an increase in the number of people with private health insurance. But that is not happening.
We thought that it might be helpful to look beyond the numbers and try to understand what's happening. We think that there might be four reasons for this seemingly counterintuitive development. That's the focus of our blog post today.
The first reason might be that states are conducting more frequent income verifications. Under CMS regulations published in 2012, states are precluded from conducting full-blown eligibility renewals more frequently than annually for those Medicaid enrollees whose eligibility is determined based on modified adjusted gross income (MAGI).1 However, an exception to this policy applies and requires a state to re-determine eligibility, even before the end of the 12-month eligibility renewal period, "whenever it receives information about a change in a beneficiary's circumstances that may affect eligibility." 42 C.F.R. § 435.916(d)(1)(i). So, for example, if a Medicaid enrollee receives an increase in income and the state discovers it via quarterly income tax withholding, the state could conduct a less-intensive eligibility redetermination even if 12 months has not elapsed. There is some indication that, at least in some states, these redeterminations are occurring and enrollees are losing Medicaid coverage as a result.
Second, a quirk in the drafting of the Affordable Care Act (ACA) may also be responsible. Under the ACA, some individuals are eligible to purchase a qualified health plan on an Exchange and receive subsidies for that health plan. This is true even if an individual has access to employer-sponsored coverage. If an individual has access to employer-sponsored coverage, but that coverage is not affordable, the individual qualifies for subsidies.
But here's the problem. Under the statute, the concept of "affordability" turns on the cost of premiums for an individual-only plan, not a family plan. Specifically, coverage is considered "affordable" under the law if the cost of an individual-only premium is less than 9.5% if the employee's household income. Internal Revenue Code § 36B(c)(2)(C)(i)(II) and Treas. Regs. 1.36B-2(c)(3)(v)(A)(1).
Let's say Hyun and Su-jin are married and have two children. Hyun's income is $60,000 annually. The cost of a family plan offered by Hyun's employer is $8,500 annually and the cost of a plan that covers Hyun only is $4,000 annually. Under the law, Hyun's self-only coverage is considered "affordable" (6.7% of his income), even though the cost of family coverage is not affordable (14% of his income). For purposes of the ACA, Hyun does not qualify for an Exchange plan subsidy, but he may not be able to afford his employer's family plan, either. And his income is likely too high for Medicaid (and possibly, depending on the State, CHIP for his children). As a result, Hyun may forego coverage (or obtain a self-only plan, leaving the rest of his family uninsured). Some people speculate that this "family glitch" has caused a continued increase in the overall uninsured rate in the United States without a corresponding increase in Medicaid and CHIP enrollment.
A third possible reason for the decline in Medicaid and CHIP enrollment at the same time that the uninsured rate is increasing is because of the repeal of the individual mandate as part of the 2017 federal income tax legislation. Under the ACA, an individual was required to have "minimum essential coverage" or else face a penalty under the income tax laws. Internal Revenue Code § 5000A(c)(2)(B). The 2017 tax reform law reduced this penalty to zero for taxable years beginning after December 31, 2018. Thus, some individuals may feel that because there is no penalty for not obtaining health insurance, they do not want to pay the expense of insurance on the individual marketplace or deal with the perceived complexities of applying for Medicaid or CHIP. This may be a third reason for the seemingly counterintuitive decline in enrollment.
Finally, it is possible that there are immigration-related reasons for the declines in enrollment. For one thing, there has been a dramatic decline in the number of refugees admitted to the United States over the past three years. Refugees can qualify for Medicaid, Immigration and Nationality Act § 412(e)(5), so the decline in refugee admissions translates into fewer Medicaid enrollees. In 2016, the United States admitted 85,000 refugees. Last week, President Trump announced that for 2020, the United States would limit the number of refugees to 18,000. This decline is surely having an impact on Medicaid enrollment.2
In addition, the recently-finalized public charge rule issued by the Department of Homeland Security is having a chilling effect on enrollment in Medicaid and CHIP, causing some individuals who are or who will soon be eligible for green cards to defer enrollment in public benefit programs like Medicaid and CHIP. Although, as we have written in the past, the rule does not apply to all immigrants, we have also noted that it is having a significant chilling effect and is deterring otherwise-eligible applicants from applying. For example, notwithstanding the five-year bar on most immigrants being able to access public health benefits, such as Medicaid, some immigrants – including asylees and refugees, for example – do qualify for Medicaid and are not affected by the public charge rule. Immigration and Nationality Act § 212(d)(4)(E)(iii). Moreover, the regulation has now been blocked by multiple federal courts; nevertheless, rumors abound in the immigrant community and it is likely that the rule continues to have a chilling effect on enrollment.
When all is said and done, there is no one reason for the decline in Medicaid and CHIP enrollment at the same time that the uninsured rate in the United States is increasing. Rather, there are a multitude of reasons. Policymakers will likely be examining these trends closely in the months ahead.
Footnote
1 42 C.F.R. § 435.916(a)(1). For most Medicaid enrollees, their eligibility is determined based on MAGI. The principal exceptions are those enrollees whose eligibility is based on age or disability.
2 Refugees are not the same as asylees. A refugee receives their status when they are outside of the United States. An asylee applies for that status once they have entered the United States. Between 2016 and 2017 (the most recent year for which data is available), there was an increase of roughly 5,000 individuals granted asylum in the United States. Department of Homeland Security, Yearbook of Immigration Statistics (2017) Table 16. Asylees can also qualify for Medicaid, so an increase in the number of asylees qualifying for Medicaid should partially offset the decline in the number of refugees. However, given the stricter standards that the Trump Administration has announced for asylum eligibility, it is not clear that the increase in 2017 is sustainable beyond that year.
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