Medicaid provides supplemental health insurance for 11 million Medicare beneficiaries with low income, who are known as “duals.” For these individuals, Medicaid covers Medicare’s out-of-pocket costs, including premiums, deductibles, and coinsurance. For some of these individuals, Medicaid also fills in gaps in Medicare coverage by paying for services such as long-term care.1 Thus, Medicaid provides vital financial protection to low-income Medicare beneficiaries and eliminates cost as a barrier to care.2
In the next 15 years, the Medicare population is forecasted to grow by 30% and half of beneficiaries are expected to have incomes less than 250% of the Federal poverty level3 (<$32 200 per individual in 2021). Despite these demographic trends and the rising cost of health care in Medicare—which places a disproportionate financial burden on beneficiaries with low incomes1—Medicaid’s eligibility and enrollment rules for elderly and disabled populations with Medicare have changed little in 3 decades. These rules lead to an abrupt drop-off (ie, a “cliff”) in Medicaid assistance for individuals whose incomes are slightly more than 100% of the poverty level ($12 880 per individual in 2021) and can make it difficult for individuals who do qualify for Medicaid to enroll. Consequently, many Medicare beneficiaries with low income are underinsured and exposed to high out-of-pocket costs. This Viewpoint examines opportunities to close these gaps in Medicaid coverage and discusses how these reforms could complement other efforts to modernize Medicaid for Medicare beneficiaries with low income.
Filling in a Supplemental Coverage Gap Among the Near-Poor
Medicaid’s eligibility rules lead to a cliff in supplemental coverage for Medicare beneficiaries who are “near poor,” that is, whose income is slightly more than 100% of the poverty level. Beneficiaries with incomes up to 100% of the poverty level and low assets qualify for Medicaid supplemental coverage, which pays for Medicare premiums and cost sharing. However, individuals whose income exceeds 100% of the poverty level generally do not qualify for Medicaid supplemental coverage, and only a subset of these individuals receive limited Medicaid benefits that pay the Medicare Part B premium.2 This leaves Medicare beneficiaries who have income that is slightly above the poverty level exposed to potentially high out-of-pocket costs unless they have alternative supplemental insurance.
Medicare beneficiaries who are ineligible for Medicaid can obtain private supplemental insurance through an employer or a Medigap plan. As an alternative to Medigap, beneficiaries can enroll in Medicare Advantage, which has become an attractive alternative to traditional Medicare partly because of its lower out-of-pocket costs. However, out-of-pocket costs are not eliminated by Medicare Advantage, nor does enrollment in private supplemental coverage fully offset the Medicaid coverage cliff for individuals with traditional Medicare. A recent study by Roberts and colleagues2 estimated that among beneficiaries covered by traditional Medicare, those with income between 100% and 200% of the poverty level were 26 percentage points less likely to have any supplemental coverage than those with incomes less than 100% of the poverty level. Beneficiaries affected by this supplemental coverage cliff had higher out-of-pocket spending and used 55% fewer outpatient services than those who qualified for Medicaid, illustrating how this underinsured population cuts back sharply on health care.2
Underinsurance among beneficiaries with income slightly above the poverty level partly reflects a lack of affordable coverage alternatives in the Medigap market. In 2021, premiums for one of the most popular Medigap plan types (Plan G) range from approximately $1200 to more than $12 000 per year (6% to >60% of income for an individual at 150% of the poverty level).4 Less popular plans have lower premiums but cover fewer costs. Moreover, Medigap has limited consumer protections to ensure affordable coverage. In all except 4 states, insurers are only required to underwrite Medigap coverage at community-rated premiums (ie, premiums that are not adjusted for health risks) within 6 months of an individual’s 65th birthday, or in limited circumstances such as the cancellation of a Medigap plan. Medicare beneficiaries younger than 65years—almost all of whom are disabled—are excluded from these protections.5
Expanding Medicaid could help close this supplemental coverage gap. To balance the scope and costs of expansion, policy makers could design a “tapered” Medicaid benefit for individuals with incomes between 100% and 200% of the poverty level. For example, Medicaid coverage could be structured so that cost sharing is gradually phased in for people with higher incomes but capped at a fixed proportion of income (eg, 10%), above which Medicaid would cover all out-of-pocket costs. The 10% figure is illustrative but approximates out-of-pocket cost limits in Affordable Care Act marketplace plans for nonelderly adults with low incomes. Analyses of similar Medicaid expansion proposals projected an annual cost of $9 billion to $16 billion (reported here with adjustment for inflation) depending on the scope of expansion.1 However, these costs will also depend on other factors, including how Medicaid benefits are tapered, take-up, and spillovers on other categories of health care use (eg, prescription drugs).
Facilitating Medicaid Enrollment
Expanding Medicaid will only close gaps in supplemental coverage if eligible individuals enroll. Only half of Medicare beneficiaries who qualify for Medicaid supplemental coverage according to the current eligibility rules receive this coverage; take up of Medicaid benefits that pay the Part B premium is even lower.2
Low take-up of Medicaid is often attributed to the complexity of obtaining this coverage, which requires people to navigate detailed program rules and provide extensive documentation of their income and assets. This complexity disadvantages some of the most vulnerable, including individuals with cognitive impairment who may not have a caregiver to assist with the enrollment process.1 For these individuals, any traditional means of outreach (eg, mailed letters) may not be sufficient to surmount barriers to participation. This complexity underscores a need for changes to how individuals apply for and obtain Medicaid.
We highlight 2 opportunities for reform. First, policy makers should pursue opportunities to automatically enroll individuals in Medicaid who receive other means-tested programs with similar eligibility criteria (eg, the Supplemental Nutrition Assistance Program). There is precedent for automatic enrollment in Medicaid: 34 states and the District of Columbia auto-enroll individuals who receive Supplemental Security Income (cash assistance for those who are elderly, disabled, or visually impaired). Prior research found that automatic enrollment of Supplemental Security Income recipients was associated with lower Medicaid disenrollment.6 Second, policy makers could simplify Medicaid’s eligibility rules for elderly and disabled populations. Current rules distinguish between sources of income and types of assets (eg, property, vehicles, and financial assets), requiring individuals to provide a detailed accounting of each. Simplifying the income test to focus on aggregate income would align this component of eligibility determinations with Medicaid’s income test for nonelderly adults. Meanwhile, a simplified asset test to focus on substantial sources of wealth (eg, trusts or second properties) would streamline documentation requirements while ensuring that Medicaid serves those with the fewest resources.
Modernizing Medicaid Amid Broader Reforms
The changes we propose could complement other reforms to the Medicaid program for beneficiaries with dual Medicare and Medicaid coverage. Over the past decade, for example, policy makers have been testing models that integrate Medicare and Medicaid coverage within managed care plans, with the goal of coordinating care and managing costs for this population.7 Policies to broaden Medicaid eligibility underscore the importance of these integration efforts, as there will be a greater need to coordinate care for a larger population with dual coverage. Integrated plans may also be well-positioned to help members navigate Medicaid’s eligibility rules and redetermination process, lessening administrative barriers to Medicaid participation.
Even as Medicare Advantage becomes increasingly popular because of its relatively low out-of-pocket costs, Medicare beneficiaries who do not have Medicaid can face substantial expenses associated with their care. Modernizing Medicaid by closing gaps in supplemental coverage and streamlining enrollment could lessen the financial burden of health care among Medicare beneficiaries with low income. The reforms we propose will increase spending—likely both for Medicaid and Medicare—because expanding supplemental coverage will increase the use of care. Given constraints on state budgets, Federal financing for Medicaid’s share of these costs will be critical. However, these investments in Medicaid, coupled with efforts to improve how Medicare and Medicaid function together, could improve the affordability of health care and strengthen both programs for future generations of beneficiaries.
Published: June 17, 2021. doi:10.1001/jamahealthforum.2021.0989
Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2021 Roberts ET et al. JAMA Health Forum.
Corresponding Author: Eric T. Roberts, PhD, Department of Health Policy and Management, University of Pittsburgh Graduate School of Public Health, 130 De Soto St, A653 Crabtree Hall, Pittsburgh, PA 15261 (email@example.com).
Conflict of Interest Disclosures: Dr Roberts reported grants from the Agency for Healthcare Research and Quality (K01HS026727) and the University of Pittsburgh Pepper Older Americans Independence Center (subaward from the National Institute on Aging, P30 AG024827-13) during the conduct of this study. No other disclosures were reported.
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Roberts ET, James AE, Sabik LM. Modernizing Medicaid Coverage for Medicare Beneficiaries With Low Income. JAMA Health Forum. 2021;2(6):e210989. doi:10.1001/jamahealthforum.2021.0989