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The Medicaid expansion gap

By Jay MacDonald · Bankrate.com
Friday, August 31, 2012
Posted: 10 am ET

Here's a curious thing about health care reform: It does away with the Medicare Part D prescription drug gap for seniors by 2020, but it passively creates another sort of gap -- let's call it the Medicaid gap -- for the "working poor" in states that choose not to expand Medicaid.

Don't misunderstand: The Affordable Care Act as written requires all 50 states to expand Medicaid by 2014. It also extends health insurance nationally to those with incomes up to 133 percent of the poverty line (remember that number) and will provide Medicaid coverage to childless adults for the first time.

At least on paper.

But in June, the Supreme Court ruled that the feds had been too heavy-handed in forcing states to expand Medicaid. So the states got the choice to expand or not -- and a lot of low-income Americans got a new gap to worry about.

In some states, it's commonplace for workers to earn well below the federal poverty line (roughly $11,000 for individuals, $19,000 for family of three) and not qualify for Medicaid. That's because states have wide leeway to set their own eligibility requirements where income is concerned.

The Associated Press reports that a family of three making $16,900 won't qualify for Medicaid in South Carolina. In Florida, an annual income of $11,000 would disqualify them. In Mississippi, it's $8,200 a year. In Louisiana and Texas, you're ineligible if your family earns $5,000 a year.

That's right: The bar goes as low as 25 percent of poverty level in some states. Not coincidentally, some of these same states have among the highest populations of working poor and have already vowed not to expand Medicaid, despite virtually a free ride from the feds to fund the expansion in the initial three years.

Regardless of whether a state expands Medicaid, Americans earning between 133 percent and 400 percent of the poverty line will be eligible for health insurance premium subsidies beginning in 2014 under health care reform.

That leaves those who live in states with low Medicaid thresholds who make less than 133 percent of the poverty line stuck in the gap without an affordable health care option if they live in states that do not expand Medicaid.

The prime directive of the Affordable Care Act could hardly be clearer: affordable health insurance for all. There is no question that those of us who can afford health insurance are paying in part for the uncompensated care that hospitals and ERs deliver to those unable to pay. Not only is an ER a terribly costly primary care option, but also when health insurance is unaffordable, people tend to delay treatment -- driving their ultimate health care costs to society even higher.

States that elect to expand Medicaid, as several have already done, can help turn this flawed dynamic around by providing an affordable option for a largely healthy population that has simply been priced out of health care.

On the other hand, states that decline to expand Medicaid risk making their own systems worse.

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