Welfare Leavers and Medicaid Dynamics: Five States in 1995. Discussion

04/14/2000

Study findings add to the body of evidence--that declines in the welfare caseload which began in 1995 are likely to have a noticeable effect on state Medicaid programs in the future, in terms of overall enrollment, caseload mix, and per capita expenditure levels. The findings also point to problems of continuity in Medicaid enrollment, which may be contributing to the lack of insurance among low-income children and their parents. Medicaid enrollment patterns that are cause for concern include:

  Alabama Arkansas California Florida Michigan New Jersey
TABLE 14
DISTRIBUTION BY ELIGIBLITY GROUP OF ENROLLEES
WITH MEDICAID ELIGIBILITY INTERRUPTIONS DURING 1995
             
Ever Enrolled  
AFDC cash 158,335 94,971 3,106,304 910,522 692,297 384,861
Poverty-related 205,398 87,801 163,561 400,298 182,658 112,083
Other 39,991 22,067 887,585 266,375 95,500 136,060
All persons 403,724 204,839 4,157,450 1,577,195 970,455 633,004
         
Enrollees with Eligibility Interruptions During 1995 "Churners"       
AFDC cash 9,567 10,284 127,704 87,184 47,502 14,664
Poverty-related 12,476 6,014 23,494 44,700 14,935 4,868
Other 2,423 1,793 65,905 25,352 5,512 5,433
All persons 24,466 18,091 217,103 157,236 67,949 24,965
             
Percent Churners  
AFDC cash 6.0 10.8 4.1 9.6 6.9 3.8
Poverty-related 6.1 6.8 14.4 11.2 8.2 4.3
Other 6.1 8.1 7.4 9.5 5.8 4.0
All persons 6.1 8.8 5.2 10.0 7.0 3.9

Source: State Medicaid Research Files

Note: Medically needy are excluded from this analysis

Principal Enrollment Group Single Coverage Gap Other Enrolled in December Other Not Enrolled in December  
TABLE 4 - California
Enrollment Pattern by Enrollment Group
     
AFDC Cash 107,640 12,621 7,443 127,704 afdc
Transitional AFDC 3,509 232 899 4,640  
EvM 10,975 829 2,906 14,710  
Poverty-Related Eligibles 11,184 5,844 6,466 23,494 pov
Medically Needy 82,837 34,940 37,986 155,763 mn
Other 25,728 9,191 9,428 44,347  
Disabled 1,611 384 213 2,208  
All Persons 243,484 64,041 65,341 372,866  
 
  65,905 other
 
  221,668  
Principal Enrollment Group Single Coverage Gap Other Enrolled in December Other Not Enrolled in December  
TABLE 4 - Florida
Enrollment Pattern by Enrollment Group -Number of Enrollees
 
AFDC Cash 59,692 14,319 13,173 87,184 afdc
Transitional AFDC 5,279 707 2,063 8,049  
Poverty-Related Eligibles 31,158 7,048 6,494 44,700 pov
Medically Needy 1,681 2,383 5,551 9,615 mn
Other 8,265 3,251 4,267 15,783  
Disabled 1,098 298 124 1,520  
    25,352 other
All Persons 107,173 28,006 31,672  

· Declines in state welfare caseloads are associated with declines in Medicaid enrollment, particularly for parents. Every state showed a decrease in Medicaid enrollment during 1995, among family members qualifying for coverage through welfare. Some of the states were able to increase enrollment through the nonwelfare eligibility groups by making greater use of the child poverty-related, transitional assistance, and medically needy groups. Nevertheless, all the states had a net decline in the Medicaid enrollment of children and their parents during the study year. Since state welfare caseloads declined at much greater rates after 1995, there is concern that Medicaid enrollment will drop even more, and that Medicaid reductions may be contributing to the continuing problem of the uninsured. However, the SCHIP expansions for children (and the associated outreach) provide some hope that these Medicaid enrollment declines for children eventually will be reversed, and that fewer low-income children will be uninsured.

The situation for parents is less hopeful unless states make major changes for this group as well. To start, states could review their procedures for making sure that families formally or informally diverted from applying for welfare are encouraged to apply for Medicaid. As we discuss further below, states also need to give greater attention to the process for making sure eligible families leaving welfare continue their enrollment in Medicaid. Finally, states could make greater use of the provisions in the PRWORA legislation that allow expansion of Medicaid coverage provisions for low-income families. A few states--including Rhode Island, the District of Columbia and Connecticut--have used the PRWORA provisions to change their requirements for the poorest families. In these states, Medicaid coverage for parents will be more equivalent to the coverage available to children through the poverty-related expansion groups. Even modest expansions in coverage for parents may also have the added benefit of improved participation rates among children.

· Many welfare leavers are not staying on Medicaid and are at risk of becoming uninsured. At least half the children and adults leaving welfare in the study states also left Medicaid. Work by Short et al. (1998) and Garret and Holahan (1999) suggests that a significant number of welfare leavers become uninsured. This problem existed prior to PRWORA, but the rapid declines in welfare caseloads after 1995 may have exacerbated the effect on Medicaid enrollment levels. State officials report that many families leave welfare without providing the information needed to redetermine their continued eligibility for Medicaid. Some families leaving welfare may not need Medicaid, since they will be able to secure private insurance through employment; but others who become uninsured may mistakenly believe that they no longer qualify for Medicaid. It is also likely that some welfare leavers perceive the effort associated with maintaining Medicaid coverage not worth the benefit; some families have indicated that they know they can reapply for Medicaid if they need to.

· Medicaid programs appear to disproportionately lose low-cost welfare leavers while continuing to cover those with higher costs. Study results show that most adults and children who left welfare and Medicaid had lower average Medicaid expenditures compared to those who stayed on Medicaid. Findings also showed that adults and children with any amount of Medicaid expenditures were more likely to maintain Medicaid coverage upon leaving welfare. In addition, at least among children, as monthly expenditures increased, so did the probability of remaining enrolled in Medicaid. These results are similar to the findings of Garret and Holahan (1999), which suggest that health status is an important determinant of maintaining Medicaid coverage upon leaving welfare.

Welfare leavers who also leave Medicaid may be healthier and use fewer medical services prior to welfare exit. However, if these individuals leave welfare and become uninsured, they may jeopardize their future health status if they lack ready access to care and delay needed services. There is also concern for children in particular, that lack of insurance may keep them from obtaining appropriate preventive services.

Another issue involves managed care capitation rates. If Medicaid programs experience disproportionately higher rates of disenrollment of healthy, low-cost welfare leavers, the casemix of the Medicaid population may be affected, especially as it relates to managed care plans. States may find that capitated payment rates for managed care need to be adjusted upward if healthy welfare leavers continue to disenroll from Medicaid at greater rates. Alternatively, states will need to implement strategies that enable them to maintain Medicaid coverage for all welfare leavers who are Medicaid-eligible.

· States are experiencing considerable turnover in their Medicaid caseloads. Turnover in Medicaid enrollment was especially high for adults, ranging from 26 to 40 percent across the study states. This is consistent with the finding of brief Medicaid spells for adults by Short et al. (1998) using SIPP data. The turnover rates for children were considerably lower, but there was still an enormous number of children who left the Medicaid program during 1995. Recent research has shown that many children who are uninsured were previously enrolled in Medicaid. Czajka (1999), using 1992-1994 SIPP data, found that nearly 40 percent of the new spells of uninsurance among children were preceded by Medicaid. He also found that just over half of children who left Medicaid were without insurance the next month, and more than half of these still appeared to be eligible. Finally, some state SCHIP programs are finding that many of the children they locate through their outreach efforts were previously enrolled in Medicaid (Shenkman et al. 1998).

Across the five study states, almost 1 million adults and nearly 1.5 million children were enrolled at some point during 1995, but had disenrolled by the end of the year. This level of turnover may well be contributing to the sustained problem of the uninsured. The Balanced Budget Act of 1997 gave state Medicaid programs a new option to address the problem of turnover, at least for children. States can now elect to guarantee child Medicaid enrollment for up to 12 months (after each eligibility redetermination). It will be important to track the experience of states who choose this option to see what impact it has on enrollment and expenditure levels.

Congress and the states continue to be concerned about the high rate of uninsured, in spite of the robust economy and continued Medicaid expansions. The results from this study suggest that the dynamics of Medicaid enrollment may be at least part of the problem. If state Medicaid programs could reduce the number of children and parents leaving welfare without continuing on Medicaid, that would be a step in the right direction. In addition, greater attention needs to be given to inappropriate turnover among children and adults qualifying for Medicaid through the nonwelfare groups. Although states may continue to make policy changes to expand Medicaid coverage provisions in an effort to reduce the number of uninsured, these changes are not likely to be effective unless steps are also taken to improve individual continuity in Medicaid coverage.

(1)The “adult” group in Medicaid generally covers the parents and other caretaker relatives of children.

(2)Noncash eligibility groups include families eligible for cash assistance but not participating; families eligible for less than $10 in AFDC benefits (who would not get AFDC, but only Medicaid benefits); families who would qualify for AFDC if AFDC were as broad as federally allowed; families who would qualify for AFDC if child care costs were paid from earnings; persons who would be eligible if they were not in medical institutions; and those who were not lawful, permanent residents (who qualified only for emergency services).

(3)We did not expect the AFDC declines reported in the SMRF data to match exactly the declines reported in the AFDC program data for the same period. State Medicaid programs report that there is often some lag before AFDC disenrollments are reflected in Medicaid data. In addition, Medicaid data include retroactive adjustments for eligibility that do not occur with AFDC program data.

(4)Beginning in 1990, a class-action court decision (Edwards v. Kizer) required California to allow families discontinued under cash assistance to remain on Medicaid until their eligibility under other coverage groups was redetermined. At the beginning of 1995, California had a large backlog of families in this group, due to staff shortages and delays; by the end of 1995, this backlog had been considerably reduced.

(5)Because the Medicaid system in California is county-based and county identifiers are available in the SMRF data, we initially attempted to identify managed care and nonmanaged care counties. We found this definition unsatisfactory and the resulting sample of persons in nonmanaged care counties had expenditure distributions that were not similar enough to the fee-for-service samples from the other states to make us confident that our California sample was adequately defined.

(6)Monthly Medicaid expenditures were based on total Medicaid expenditures for calendar year 1995 adjusted for the number of months a person was enrolled in 1995.

(7)As an example, among adults in Michigan the first quintile of monthly expenditures ranged from less than one dollar to $20.78, the second from $20.83 to $46.58, the third from $46.63 to $97.08, the fourth from $97.11 to $264.33, and the fifth quintile ranged from $264.42 to $17,042.50. Among children the quintiles were: (1) less than one dollar to $9.58; (2) $9.60 to $19.00; (3) $19.08 to $33.00; (4) $33.08 to $65.83; and (5) $65.89 to $19,357.92.

(8)The SMRF 1995 enrollment data are both right- and left-censored. We do not have information on Medicaid enrollment prior to January 1995 and subsequent to December 1995. The length of enrollment data relate only to the duration of enrollment during 1995.