There is still time to shrink the coverage gap

by The Incidental Economist on December 19, 2013 · 1 comment

We’ve discussed the Medicaid expansion many times before on this blog. As we near Jan 1, however, many of the things I’ve written about will change from theory to practice. We will stop guessing at what will occur, and begin to review actual data on what is happening.

Until that time, however, it’s still worth talking about who will fall through the coverage gap. This term refers to people who will make too little to qualify for subsidies in the exchanges, but will also be ineligible for Medicaid because their state is not participating in the Medicaid expansion. I know that sounds odd, but it’s important to remember that subsidies exist only for people making above 100% of the poverty line. People below that amount were supposed to get Medicaid, and the law is not equipped to deal with those states who refuse to expand the program.

This is a real problem, as many parents are ineligible for Medicaid as it exists today. The median income limit for parents in states foregoing the expansion will be 47% of the federal poverty line next year. In other words, a family of three that makes more than $9,200 a year will be “too rich” for Medicaid.

Adults who do not have children under the age of 18 years, on the other hand, are pretty much ineligible even if they make no money at all.

A recent brief from the Kaiser Family Foundation updates past reports on adults who fall into the coverage gap. Almost four out of five of them live in the South. Another 11% live in the Midwest, leaving 7% in the Northeast and 4% in the West.

About half of these people are White, and another quarter or so are Black. About a fifth are Hispanic. This means that racial and ethnic minorities are significantly over-represented in those who fall into the coverage gap. This is, of course, because racial and ethnic minorities are over-represented among the very poor in the United States.

About half of these people ate age 35 to 64. The rest are about evenly divided among those age 19-24 and 25-34. The good news, I suppose, is that almost none of them are 65 or older, or are 18 or younger. This is because those populations are covered rather well by Medicare and Medicaid/CHIP respectively.

This doesn’t mean, though, that children won’t be affected by this lack of coverage. Ample evidence exists to show that an uninsured parent has a detrimental effect on a child.

There will be, unfortunately, few options for those who fall into the coverage gap. Just under half of them are not working, and therefore have no option for increased wages to let them earn enough for subsidies in the near future. Another quarter of them work part time, and therefore don’t earn enough, and are likely not offered coverage from their employers.

The remaining 29% are full time workers. Yet they still make less than the federal poverty line, and therefore they don’t qualify for subsidies. They also don’t get insurance from their jobs. Most of them work for small companies which will never be subject to the employer penalty. Many of them also work in sectors, like agriculture or the service industries, which don’t traditionally offer insurance to their employees.

These people are, for the most part, out of luck. KFF reports that the average premium for a bronze plan (unsubsidized) in the exchanges is $224 a month. This is at least 25% of the income for someone in this group. There’s no way that they could afford the premiums.

It’s worth considering, though, that the majority of people in the coverage gap are working poor who, ironically, make too little to be helped out by the government. If they made just a bit more, they might qualify for insurance that is so subsidized that it is almost free. But because of the coverage gap, the people with the fewest resources get less help (none)  than those who have a bit more money.

Regardless of the rhetoric you might hear, there is little question that people who are left with no options are worse off than those who receive some coverage. There is still time for states to take steps to reduce the number of people who will fall into the coverage gap, but not much.