Children's Health Insurance Patterns: A Review of the Literature

Chapter IV.
How Many Uninsured Children Are Eligible for Medicaid and What Is the Medicaid Participation Rate for Children?

This chapter examines the literature on two related estimates: (1) how many uninsured children appear to be eligible for Medicaid, but are not participating, and (2) how many children overall are eligible for Medicaid and how many participate.(1) More published research has addressed the first estimate than the second, using the family income and age of the uninsured child to calculate the number or proportion of uninsured children eligible for Medicaid, but not participating. In most instances, family income and the child's age are compared to a uniform set of national income standards based on the poverty-related Medicaid expansions.

In reality, though, Medicaid eligibility is much more complex, and it varies substantially by state. State income and asset thresholds for different age groups vary significantly (some state income thresholds now reach 250 percent of poverty for all children under age 18), the majority of states have medically needy programs (with the spend-down component), and the majority of states also extend coverage to so-called Ribicoff children (children in families not meeting AFDC dependent child requirements).(2) Moreover, children with private insurance coverage can be eligible for Medicaid if family income is low enough, if coverage is limited, or if uncovered medical expenses are high enough to reduce family income to medically needy levels. As a result of these complexities, few researchers have attempted to use simulation models to estimate overall Medicaid eligibility for children, accounting for state variation, family structure, and uncovered medical expenses. Even when they have attempted to simulate these more complex provisions, the literature is sparse, largely unvalidated, and tends to lack details on the eligibility simulation algorithms used.

Estimates of the number of uninsured eligible for Medicaid may tend to be too high because of the Medicaid underreporting problem that plagues most of the survey data used for the estimates. Medicaid underreporting suggests that some of the Medicaid-eligible uninsured may actually be enrolled in Medicaid but not reporting it during the survey. Only one organization, The Urban Institute, attempts to adjust for Medicaid underreporting when estimating the number of uninsured eligible for Medicaid. As a result, the Institute's estimate is about half that of the estimates of other organizations using the same data. To complicate matters further, recall from Chapter II that there is some evidence that The Urban Institute may over-adjust for Medicaid underreporting, making their estimate of the Medicaid-eligible uninsured too low. In conclusion, the combined effects of Medicaid underreporting and the difficulty of simulating Medicaid eligibility make estimates of the Medicaid-eligible uninsured variable and inexact.

This chapter first examines the literature on the estimates of the number of uninsured children who are eligible for Medicaid. Then, this chapter examines the more general question of how many children overall are eligible for Medicaid and how many participate.

A. HOW MANY UNINSURED CHILDREN ARE ELIGIBLE FOR MEDICAID?

Estimates of the number of uninsured children eligible for but not participating in Medicaid have been undertaken by the following researchers and organizations: The Urban Institute, Reschovsky et al., Thorpe, GAO, and the Center for Budget and Policy Priorities (CBPP). All but Reschovsky et al. used the March CPS for their estimates; Reschovsky et al. used the CTS Household Survey data. These estimates are presented below and summarized in Table IV.1.

Table 4-1

Generally, these estimates showed that the overall number of uninsured children eligible for, but not participating in Medicaid, ranged from 1.6 to 3.3 million during 1995 (24 to 45 percent of all uninsured children). Differences in the estimates appear to vary by data source used, by whether or not adjustments were made to reconcile Medicaid enrollment with Medicaid administrative data, and by the complexity of the simulation method that was used.

1. The Urban Institute

The Urban Institute used March 1996 CPS data to estimate the number of uninsured children age 0 to 17 that were eligible for Medicaid in 1995 but not participating (personal communication with Beth Kessler of The Urban Institute, August 12, 1997). To make the estimate, they used their TRIM2 microsimulation model, which simulates Medicaid eligibility for children on the basis of the following criteria: state-specific poverty related criteria, AFDC and SSI participation, state medically needy programs, and asset eligibility. In addition, the TRIM2 model adjusts for the CPS underreporting of Medicaid enrollment and AFDC and SSI participation, thereby increasing the number of Medicaid enrollees.(3) They found that in 1995, at least 1.6 million (24 percent) of the 6.9 million children classified as uninsured were eligible for Medicaid, but not enrolled.

2. Reschovsky et al.

Reschovsky et al. (1997) used the CTS data to determine how many uninsured children age 0 to 17 were eligible for Medicaid but not enrolled. Reschovsky et al. determined Medicaid eligibility only on the basis of age and family income in relation to each state's poverty-related eligibility standards. Reschovsky et al. cautioned that their eligibility estimates were approximations because of the following limitations in the data and their eligibility algorithm: (1) eligibility under Medicaid is usually based on monthly income while the CTS asked respondents for annual income only; (2) annual income may be subject to recall error; (3) asset eligibility was not taken into account; and (4) medically needy and some other Medicaid provisions were not taken into account. Reschovsky et al. found that 3.2 million (38 percent) of the 8.5 million children uninsured according to the CTS were eligible for Medicaid. In making this estimate, Reschovsky et al. did not adjust the CTS data to account for Medicaid underreporting.

3. Thorpe

Thorpe (1997b), using March 1996 CPS data, estimated that 3.3 million (31 percent) of the 10.5 million uninsured children age 0 to 18 in 1995 were eligible for Medicaid. Thorpe did not describe in any detail his methodology for determining Medicaid eligibility, so it is not clear whether he used state specific income thresholds. Thorpe did not adjust the CPS data to account for Medicaid underreporting.

4. Estimates for Poverty-Related Expansion Children Only

Two organizations, the GAO and CBPP, used the March 1995 CPS to estimate a subset of younger children eligible for but not participating in Medicaid -- only those eligible for Medicaid by federal mandate. This included all uninsured children age 0 to 5 in families with incomes below 133 percent of poverty and uninsured children born after September 30, 1983 with family income below 100 percent of poverty. Both organizations used only the federal minimum income thresholds and did not account for states using higher thresholds.

GAO (1996) estimated that there were 2.9 million uninsured children under age 12 in 1994 who were eligible for Medicaid by federal mandate. CBPP (Summer et al. 1997) also used 1995 CPS data, but their estimate was computed for children under age 11. CBPP found 2.7 million uninsured children under age 11 in 1994 were eligible for Medicaid (45 percent of the 5.9 million uninsured children under age 11).

B. WHAT IS THE MEDICAID PARTICIPATION RATE FOR CHILDREN?

Estimates of the overall Medicaid participation rate for children have been undertaken by the following researchers and organizations: The Urban Institute, CBO, GAO, and CBPP. All used the March CPS for their estimates These estimates are presented below and summarized in Table IV.2. Estimates of the overall Medicaid participation rate varied depending on whether Medicaid underreporting adjustments were used, the complexity of the eligibility simulation, and the universe of children examined.

1. The Urban Institute

The Urban Institute used March 1996 CPS data with its TRIM2 microsimulation model to simulate the average yearly Medicaid participation rate for children age 0 to 17 in 1995. Urban Institute researchers found that an average of 26.4 million children were eligible for Medicaid and 22.1 million enrolled, for a participation rate of 83.6 percent.(4) This high participation rate incorporates the TRIM2 model's adjustment for Medicaid underreporting. As far as we can determine, none of the other estimates reported in Table IV.2 includes an adjustment for Medicaid underreporting. As a result, these other participation rates are likely to be depressed.

Table 4-2

2. Congressional Budget Office

Using 1996 CPS data, CBO (Bilheimer 1997) estimated that in 1995 the Medicaid participation rate was 60 percent for children age 0 to 18 who did not receive welfare cash assistance and did not have private insurance. Their report did not provide details on their methodology for estimating Medicaid eligibility. It is our understanding that CBO does not routinely adjust its CPS estimates for Medicaid underreporting.

3. SIPP Estimates of Medicaid Eligibility

To date, there have not been any Medicaid eligibility estimates published using the SIPP. Blumberg et al. (1997) adapted The Urban Institute's TRIM2 microsimulation model to run on SIPP data for their study of crowd-out, but they have not yet reported any Medicaid eligibility or participation rate estimates.

4. Estimates for Poverty-Related Expansion Children Only

Both the GAO (1996) and the CBPP (Summer et al. 1997) used the March 1995 CPS to estimate Medicaid participation for the subset of younger children eligible for Medicaid by federal mandate. As stated in the previous section, this included all uninsured children age 0 to 5 in families with incomes below 133 percent of poverty and uninsured children born after September 30, 1983 with family income below 100 percent of poverty. GAO did not calculate a Medicaid participation rate per se. However, it estimated that 14.3 million children under age 11 in 1994 were eligible for Medicaid by federal mandate because of age and family income. Of those, 11.4 million had private or public insurance coverage and 2.9 million were uninsured. Thus, they estimated insurance coverage (public or private) of 79.7 percent for this Medicaid eligible subset of children.

CBPP found that approximately two-thirds of the children age 0 to 10 who were eligible for Medicaid were enrolled in the program in 1994. When they excluded all children receiving welfare cash assistance from their calculations in order to isolate the participation rate among those eligible for Medicaid under the expanded poverty-related groups, they found that the participation rate dropped to 38 percent.(5)

C. PARTICIPATION RATES IN OTHER PUBLIC ASSISTANCE PROGRAMS

In this section, we examine the participation rates in other public assistance programs as a point of comparison to the Medicaid participation rates presented above. Specifically, we present estimates of participation rates for the Aid to Families with Dependent Children (AFDC) program and the Food Stamp Program (FSP). Comparisons of AFDC and FSP participation rates are not exactly comparable to Medicaid participation rates because one can be participating in Medicaid without actually receiving services, where as participants in AFDC and the FSP all currently receive benefits.

Ruggles and Michel (1987) estimated AFDC household participation rates for 1973 through 1984 using CPS data and The Urban Institute's TRIM2 microsimulation model, which adjusts for underreporting of AFDC participation in the CPS. During those years, they found that the participation rate ranged from 75 percent to 83 percent.

Stavrianos (1997), using SIPP data and the MATH® SIPP microsimulation model, which adjusts for the underreporting of FSP participation in the SIPP, found that the household participation rate for the FSP declined from 59 percent to 56 percent between 1985 and 1988 and then rose to 69 percent in 1992 and 1994. Stavrianos noted that in order to understand participation rate trends, it is necessary to examine the trends in eligibility and participation -- the two component parts of the participation rate. For example, the decline in the participation rate from 1985 to 1988 was largely due to legislative changes authorized by the 1985 Food Security Act. Although the act substantially increased the number of eligible households, most of the newly eligible households did not participate initially. Therefore, even though the number of FSP participants remained steady from 1985 to 1988, the participation rate fell.

Most of the Medicaid participation rates cited above are lower than the estimated participation rates in the AFDC and Food Stamp programs. Devaney, Ellwood, and Love (1997) cite four reasons that Medicaid may have a low participation rate. First, they note that there is a general lack of awareness that children can now qualify for Medicaid even if both parents are present in the home or one parent is working full time. Second, the time-consuming, sometimes difficult application process is an obstacle to many people. Third, families may not apply for Medicaid because of its stigma as a welfare program. Fourth, because most children are healthy, their parents may not feel there is a compelling reason for them to apply for Medicaid.(6) One additional reason that Medicaid may have a low participation rate is that the uninsured may have access to free care, either from physicians who choose not to deal with the Medicaid program, or from free clinics.

Endnotes

1.  Throughout this chapter, the term "Medicaid eligible" will be used to refer to those that are eligible for Medicaid regardless of whether they are actually enrolled. This differs from HCFA(now known as CMS)'s definition of the term "Medicaid eligible," which denotes those that are enrolled but may or may not be receiving services.

2.  Ribicoff coverage continues to be important for children in two-parent families born before October 1, 1983 (ages 14 to 18) who are not covered by the mandatory poverty-related expansions for children or by optional state expansions.

3.  The Urban Institute is the only organization that accounts for Medicaid and cash welfare underreporting in their estimates of Medicaid participation rates.

4.  The participation rate among children whose eligibility was tied to welfare participation was higher than that for those whose eligibility was tied to poverty related expansions. Using March 1994 CPS data and the TRIM2 model, Dubay and Kenney (1996) found that the Medicaid participation rate among children whose eligibility was tied to welfare participation was 90 percent versus 69 percent for children eligible under the poverty-related expansions.

5.  Comparing Medicaid participation rates among the cash and non-cash eligibility groups is problematic using the CPS because the Census Bureau assigns Medicaid to children in all families that receive AFDC and in most families that receive SSI. In other words, the Medicaid participation rate for the cash groups in the CPS is, by definition, 100 percent.

6.  Related to this fourth reason is the argument that many parents may feel their children are, in fact, covered by Medicaid because their children can be enrolled once they get sick. Of course, these children would not be receiving preventive health services.

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