Why Some Patients are Trapped in Medicaid Coverage Gap

March 2, 2014
Martin Merritt

Some patients are disqualified from help obtaining health insurance coverage because they simultaneously earn too much, and too little.

Many believe that healthcare is available to anyone who really needs it. That isn’t exactly true. 

Sure, under the Emergency Medical Treatment and Active Labor Act (EMTALA), hospital emergency rooms are supposed to treat and stabilize emergency conditions, regardless of ability to pay the bill, but what about people who chronically cannot afford care? 

Prior to the Affordable Care Act (ACA), Medicaid served as the nation’s safety net for the poor. But there was usually a catch: One ordinarily must be a member of the “deserving poor,” a phrase in vogue in 1965, when people said all kinds of stupid things in public.  It means that in order to qualify for Medicaid, a person must be both poor and “something else": disabled, pregnant, or a child.  Simple poverty wouldn’t cut it. 

Medicaid was designed to be administered by the states, that were then partially reimbursed by a block federal payment.  This was a compromise between conservatives who opposed both Medicare and Medicaid, but argued if the program were adopted at all, it should be run by the states and funded by a block grant to the poorer states. This would avoid a big, new federal agency telling physicians what to do and how to do it.  

So we compromised. Medicare is run by a big federal agency telling physicians what to do and how to do it; the Medicaid program is run by states, who largely dedicate efforts toward figuring out ways to punch ever-widening holes in the social safety net. 

Nowhere is this more evident than in states which refuse to expand eligibility for the Medicaid program under the ACA.  The plan called for an elimination of state-by-state eligibility limits. In Alabama a person might earn too much if he earned 10 percent of the federal poverty level (FPL), meaning virtually any income at all would disqualify a person; while in Texas, the rate might be 50 percent.  Under the ACA, a person would be eligible up to 133 percent of the FPL, or about $28,000 per year for a family of four.  Those earning between 133 and 400 percent of the FPL would qualify for subsidies on the health insurance exchanges.  At least that was the plan.

However, there is a gap in states that refuse to expand Medicaid.  Suppose a family in Texas earned just over the current Medicaid income limit.  The family would not qualify for Medicaid, but also would not qualify for a subsidy in the health insurance exchange, until the family earns 133 percent of the FPL.

Hair stylist Ernest Maiden recently told the Wall Street Journal that he was dumbfounded that his $200 per week pay in Birmingham, Ala., disqualified him from any help at all in obtaining health insurance.

All told, the Kaiser Foundation estimates nearly five million people ages 18 to 64 get no financial help to buy coverage because of the gap, according to the Wall Street Journal. 

While it may seem odd that people could be disqualified from help because they simultaneously earn too much, and too little to be helped, that is precisely what is occurring.  Why? No one in Washington seriously thought that the states would turn down federal money.  The federal government offered to pay 100 percent of the cost of “newly eligible” Medicaid beneficiaries, but only for three years, at which time the subsidy would be reduced.

The resulting gap in coverage shines a spotlight on a problem we thought the ACA had solved: People should not wait until an emergency arises to obtain care.  Until this wrinkle can be ironed out, millions are caught in the middle.