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The Role of Health Insurance in Successful Labor Force Entry and Employment Retention

Publication Date

U.S. Department of Health and Human Services

The Role of Health Insurance in Successful Labor Force Entry and Employment Retention

Gina Livermore, Cornell UniversityMark Nowak, The Lewin GroupDavid Stapleton, Cornell University

October 2001

This report was prepared under contract #HHS-100-97-0011 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and The Lewin Group. For additional information about the study, you may visit the DALTCP home page at or contact the ASPE Project Officer, Andreas Frank, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. His e-mail address is:






A. Importance of Health Insurance to People with Disabilities

B. The Role of Health Insurance in Influencing Employment Decisions

C. The Evolution of Programs and Policies

  1. Social Security Act of 1980
  2. Balanced Budget Act of 1997
  3. Ticket to Work and Work Incentives Improvement Act of 1999
  4. Supreme Court Decision in Olmstead v L.C.


A. Introduction

B. Access to Health Insurance a Primary Need Throughout Life

  1. Childhood
  2. Adulthood

C. Gaps in Health Care Coverage Common

  1. Lack of Drug Coverage and Eligibility Restrictions Chief Public Health Insurance Limitations
  2. Exclusions and Caps Create Limitations to Private Health Insurance
  3. Coverage Limitations Detrimental to Recovery

D. Transitions from Public to Private Coverage Difficult

E. Employment Increases the Complexity of Health Care Management

  1. Participants Assemble a Patchwork of Programs to Preserve Access to Health Insurance
  2. Participants Lack Information About Program Restrictions and Criteria


A. Expanding Access to Needed Services

  1. Implications for the Effectiveness of Ticket of Work Act Provisions
  2. State Children's Health Insurance Program

B. Awareness and Use of Work Incentive Provisions




EXHIBIT 1. Health Insurance Coverage of Persons Age 21-62, by Disability Status

EXHIBIT 2. Health Insurance Coverage of Persons Age 18-64, by Employment and Disability Status

EXHIBIT 3. Medical Needs and Coverage Gaps Reported by Focus Group Participants

EXHIBIT 4. Participant Efforts to Gain Access to Health Insurance Coverage


Work on this project was conducted by The Lewin Group and its subcontractors, Berkeley Policy Associates and Cornell University. The study was funded by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (ASPE).

Staff from The Lewin Group, under the direction of Gina Livermore, conducted the literature review, developed the data collection methodology and instruments, prepared OMB clearance materials, conducted screening for the Newark, NJ focus groups, developed a database of the focus group findings, and analyzed and prepared the reports of the findings for this project. These staff principally include Mark Nowak, Julie Karp, Elizabeth Eiseman, Jennifer Duffy, and Mark Laidlaw.

Staff from Berkeley Policy Associates, under the direction of Sherry Almandsmith and Kay McGill, assisted in the development of the data collection methodology, pre-tested the data collection instruments, conducted the screening for the Seattle, WA and Los Angeles, CA focus groups, arranged and conducted the focus groups at all sites, and summarized the findings of each focus group session. These staff include Linda Toms Barker, Laurie Posner, Michellana Jester, Christie MacDonald, Susan Haight-Liotta, Laura Ellerbe, and Zinnia Ng.

David Stapleton of Cornell University provided technical guidance throughout the project and co-authored all project reports.

The project has benefited greatly from the input of a number of individuals: Bob Williams, Floyd Brown, and Andreas Frank at ASPE were instrumental in refining the scope and setting the direction for the project, and played important roles in shaping the analysis and presentation of the findings. At the start of the project, the input received from the project’s Technical Advisory Group (TAG) greatly influenced the overall direction of the study, the focus group methodology, and the selection of the sites where the focus groups were conducted. The TAG members included: Ruth Brannon, National Institute for Disability and Rehabilitation Research; Henry Claypool, Administration on Developmental Disabilities; Judith Cook, University of Illinois-Chicago; Bruce Flynn, Washington Business Group on Health; Lex Frieden, Institute for Rehabilitation and Research; Claire Ghiloni, Massachusetts Rehabilitation Commission; Allen Jensen, George Washington University; Jennifer Kemp, President’s Committee on the Employment of Adults with Disabilities; John Kregel, Virginia Commonwealth University; Doug Kruse, Rutgers University; Charlie Lakin, University of Minnesota; Pamela Loprest, The Urban Institute; Bonnie O’Day, National Rehabilitation Hospital Research Center; Becky Ogle, Presidential Task Force on the Employment of Adults with Disabilities; Alan Shafer, Social Security Administration; and Ed Yelin, University of California-San Francisco.

We also want to acknowledge the contribution of Michael Collins of the California State Independent Living Council (SILC). His organization funded a study in the Los Angeles area conducted by Berkeley Policy Associates using the focus group methodology developed under this project. The samples and findings of the California SILC study have been integrated with those obtained from the focus groups conducted in Los Angeles for this study.

We greatly appreciate the assistance of the many local disability organizations who provided invaluable assistance in recruiting focus group participants, providing locations to conduct the groups and staff to assist with on-site logistics.

Finally, we would like to thank the nearly 300 individuals who participated in the focus groups and so generously and candidly shared their experiences with us. Without their participation, the study would not have been possible.

The opinions, conclusions, and errors in this report are the sole responsibility of the authors, and do not represent the official views of the U.S. Department of Health and Human Services, the California State Independent Living Council, Berkeley Policy Associates, Cornell University, or The Lewin Group.


This report is one in a series developed by The Lewin Group and its subcontractors, Berkeley Policy Associates and Cornell University, for the Office of the Assistant Secretary for Planning and Evaluation (ASPE) within the U.S. Department of Health and Human Services, in connection with the study, Research on Employment Supports for People with Disabilities. For this project, we reviewed available studies and literature, and collected detailed information on the experiences of people with significant disabilities who are successfully and competitively employed, the events and factors affecting their employment decisions, the relative importance of specific factors, and the reasons for successful and unsuccessful employment attempts.

The goal of the study is to gain a better understanding of the role supports play in the employment of people with disabilities. In particular, the study aims to identify the role(s) supports play in two key areas: providing assistance to people with significant disabilities to participate successfully in competitive employment, and improving employment outcomes for people with disabilities. This project is unique among the many investigations of the factors affecting the employment of people with disabilities in that it focuses on those who have achieved a measure of success in employment, and the factors contributing to their success.

For this study, we defined the term “supports” very broadly. Supports may include public or private income or in-kind transfers, such as Social Security Disability Insurance (DI), Supplemental Security Income (SSI), and payments for medical care, prescription drugs, medical devices, assistive technology, and personal assistant services. Supports also include employment development programs, such as employment and training programs, job search and retention programs, independent living programs, other housing supports, special education, school-to-work programs, and transportation services. Laws and regulations that encourage behaviors (on the part of firms or individuals) that promote the employment of people with disabilities and informal assistance provided by family members, co-workers, or friends also fall under the definition of supports used in this study.

The study has a number of components: a comprehensive review of the recent literature (since 1990) on issues related to the employment of people with disabilities; the development of an inventory of employment programs serving people with disabilities at the federal, state and local levels; and the conduct of approximately 45 focus groups with working people with significant disabilities in three sites. The findings in this report are based primarily on the information obtained via the literature review, and on the data gathered from 284 focus group participants conducted between April and December 2000 in Seattle/Tacoma, Washington; Newark, New Jersey; and Los Angeles, California. A full description of the focus methodology and summary of the findings are described in other reports in this series.


For people with disabilities, access to health insurance is frequently a critical factor in determining employment status, especially among Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) recipients. People with disabilities typically have much greater need for medical services and prescription drugs than people without disabilities, and these needs are more often met through receipt of public health insurance (i.e., Medicaid and Medicare) than are the needs of the general population. Because eligibility for public health insurance is affected by earnings, employment decisions among people with disabilities are frequently dependent upon health insurance needs.

For example, high potential health care costs combined with an inability to obtain private health insurance might influence a person’s decision to exit the labor force and apply for DI or SSI to obtain benefits through Medicaid or Medicare. Likewise, DI and SSI disability program participants face a strong disincentive to leave these programs and return to work, because their eligibility for public health insurance is largely contingent on disability program participation, which is contingent on limited earnings. In recent years, a variety of policy changes have been enacted to extend Medicare and Medicaid coverage to working people with disabilities in an effort to reduce this potential barrier to employment.

In this paper we provide a summary of the health insurance issues affecting employment of people with disabilities, including a discussion of the current programs and policies that are available. We then present findings from focus groups conducted with individuals with disabilities who have achieved a reasonable measure of employment success. During these focus groups, we learned about the extent to which access to health care influenced employment decisions of participants, and about various strategies participants employed for securing access both to employment and needed health care.

Nearly all focus group participants completed their transitions to employment ten or more years ago, and, therefore, did so in a program and policy environment that is much different than today’s. In addition, the focus groups were conducted prior to, or in the early stages of, implementation of several important expansions in public health insurance availability for people with disabilities, most recently under the 1999 Ticket to Work and Work Incentive Improvement Act (Ticket to Work Act). Nonetheless, their experiences are informative about the likely value of the changes that have occurred, and about further changes that might be needed to increase employment of people with disabilities while preserving access to health care for such individuals. We discuss the implications for public policy in the final section.


A. Importance of Health Insurance to People with Disabilities

Access to health insurance is particularly important for many people with disabilities because of their special health care needs. Not only do people with disabilities use health care at higher rates than the general public (Alecxih et al., 1995), per capita medical expenditures are higher, as well. Rice and LaPlante (1992) found that among people with one limiting chronic condition, expenditures were three times higher than among individuals with no chronic limiting conditions. For those with two limiting chronic conditions, expenditures were five times as high.

Because of their medical conditions, people with disabilities often have difficulty obtaining affordable private health insurance, and those who are able to obtain such coverage may face substantial restrictions in coverage (Friedland and Evans, 1996). For example, a 1998 survey of 1,000 Americans with disabilities age 16 and older found that among the 90 percent of adults with disabilities who are covered by health insurance, 32 percent reported that a special need related to their disability (e.g., certain therapies, equipment, or medicine) was not covered. Moreover, 20 percent of adults with disabilities had been unable to get medical care that they needed on at least one occasion during the past year, compared to 11 percent of adults without a disability (Louis Harris and Associates, 1998).

For a number of reasons, including high rates of unemployment, low income, public insurance eligibility requirements, and insufficient private coverage, working-age people with disabilities are much more likely than those without disabilities to rely on public, rather than private, health insurance (Medicaid and Medicare) (Exhibit 1). Working-age people with disabilities are also somewhat less likely to be uninsured than those without disabilities, because of their access to Medicare and Medicaid through the DI and SSI programs, respectively.

EXHIBIT 1. Health Insurance Coverage of Persons Age 21-62, by Disability Status
     All      No Disability     Non-Severe Disability     Severe Disability   
Health Insurance Coverage
Privately Insured 77% 79% 75% 47%
Medicare 8% 6% 11% 40%
Medicaid 2% 1% 5% 28%
Other Public Insurance 1% 1% 1% 3%
Uninsured During Year
Uninsured All Year 15% 16% 14% 8%
Uninsured All or Part Year   28% 28% 26% 21%
Insured All Year 72% 71% 73% 77%
Source: Livermore et al. (2001) based on data from the 1996 and 1997 Medical Expenditure Panel Survey.

Looking at health insurance coverage by employment status, data from the 1993 Survey of Income and Program Participation (SIPP) show that nearly 60 percent of people with disabilities who are unemployed rely on public health insurance (Exhibit 2). By comparison, the figure for unemployed individuals without disabilities is roughly 19 percent. Among employed persons, roughly nine percent of those with disabilities have public health insurance, compared to less than two percent of those without disabilities. Data from the 1994 National Health Interview Survey (NHIS) reveal a similar pattern. Among unemployed individuals reporting a disability, nearly 60 percent relied on public health insurance, while only about 17 percent of unemployed individuals without disabilities relied on Medicare and/or Medicaid (Stapleton et al., 1998).

EXHIBIT 2. Health Insurance Coverage of Persons Age 18 -64, by Employment and Disability Status
  Employed(%) Not Employed(%) Total(%)
Without Disabilities
Private Insurance Only 95.0 75.9 76.3
Medicaid + Medicare 0.0 0.0 0.0
Other Medicare 0.0 0.0 0.0
Other Medicaid 1.6 18.7 4.0
Other 3.4 5.4 3.1
With Disabilities
Private Insurance Only 85.1 37.3 51.3
Medicaid + Medicare 0.4 7.0 3.0
Other Medicare 2.1 17.5 7.9
Other Medicaid 6.4 34.6 16.6
Other 4.9 3.6 3.5
Source: Stapleton et al., 1998

Medicare provides health insurance coverage for individuals age 65 and older, and for persons with disabilities participating in the DI program. Although nearly all persons age 65 and over are automatically eligible for Medicare, DI beneficiaries become eligible for Medicare after a 24-month waiting period. Medicare includes part A, hospital insurance, and part B supplemental medical insurance. Individuals eligible for Medicare are entitled to part A. Part B participation is voluntary and requires the payment of a monthly premium.1 On returning to work, a former DI recipient can continue to receive Medicare benefits for up to eight and one-half years through the Extended Period of Medicare Eligibility provision, or EPE, which was increased from four to eight and one-half years by the 1999 Ticket to Work Act.2

Medicaid is a Federal-State matching entitlement program that provides medical assistance primarily to low-income children, parents, persons over age 65, and people with disabilities. In most states, all SSI recipient are eligible for Medicaid; in a few, a small share of SSI recipients is ineligible because the Medicaid means test is more restrictive. SSI recipients who return to work and lose their SSI payments due to earnings might, in some cases, continue to receive Medicaid under section 1619(b) of the Social Security Act. Section 1619(b) allows continued Medicaid coverage and SSI eligibility but with no monthly SSI payments to recipients whose income, after certain disregards, exceeds the state’s break-even point, which is based on the average Medicaid spending level for SSI disability recipients in the state. The 1619(b) income limit varies substantially across states because of variation in Medicaid spending and state SSI supplements.

Federal legislation has recently given states the option of de-linking Medicaid receipt from SSI participation. Section 4733 of the 1997 Balanced Budget Act allows states to extend Medicaid eligibility to workers with disabilities even if they have never received or are ineligible for SSI benefits. States may require the payment of premiums to participate in these Medicaid “Buy-in” programs. Under section 4733 programs, those buying in must meet all SSI eligibility criteria other than the earned income requirements and have family income (after certain deductions) below 250 percent of the federal poverty level. States can require these Medicaid recipients to pay for their benefits, under a sliding scale. In 21 states, however, the income limit for a section 4733 Buy-in program was lower than the 1619(b) eligibility threshold. The Ticket to Work Act expanded this option by allowing states to eliminate all income and asset restrictions on Medicaid Buy-in programs for persons with disabilities. Currently, sixteen states have Medicaid Buy-in programs for workers with disabilities implemented either under the 4733 provisions, the Ticket to Work Act provisions, or through waivers granted by the Centers for Medicare and Medicaid Services (CMS).3, 4 Several additional states have recently passed legislation, or have legislation pending, to establish such programs.

B. The Role of Health Insurance in Influencing Employment Decisions

Because of the importance of health insurance, access to insurance coverage may figure heavily in the employment decisions of people with disabilities. Health insurance coverage may serve as an incentive to enter the labor market when employment promises increased health insurance access or coverage. This might be true for unemployed individuals without access to Medicaid or Medicare, where employment might provide access to private coverage or provide income to pay for medical services directly.

The number of non-working people with disabilities for whom employment is a realistic route to insurance or health services is probably small, however. Rather than creating incentives for employment, it is far more common for health insurance to be a disincentive to employment. This is particularly true for the majority of working-age people with disabilities covered by Medicare and/or Medicaid for whom employment can mean the potential loss of health benefits. Several surveys of people with disabilities indicate that health insurance is a major factor in employment decisions. A survey of 1,200 leaders of major disability constituencies conducted by the President’s Committee on Employment of People with Disabilities identified the fear of losing Medicaid/Medicare as the greatest barrier to the employment of people on SSI or DI (President’s Committee, 1994). A survey of Alaska residents with disabilities found that 51 percent of respondents reported not having affordable health insurance as a major barrier to work. Similar surveys conducted in Oregon, Vermont, and Wisconsin have shown that a large proportion of respondents with psychiatric disabilities and those with multiple impairments report that unless a job offered prescription drug coverage, they could not afford to work (Hanes, 2000).

A number of empirical studies confirm the survey evidence that efforts to gain or retain public insurance coverage affect labor force participation. For example, three studies have found that expansions of Medicaid benefits to coverage of former Aid to Families with Dependent Children (AFDC) and other low-income families increases labor force participation by mothers and decreases AFDC program participation (Moffitt and Wolfe, 1992; Yelowitz, 1995; and Wolfe and Hill, 1995).5 In particular, Moffitt and Wolfe (1992) found that the effect of extending private health insurance to all working female heads of households would be to lower the AFDC caseload by 10 percent and to raise employment by eight percent.6 In Wolfe and Hill (1995), the estimated relationship between health insurance and employment were particularly strong for mothers who either had a disability or had a child with a disability.

Additional evidence that health insurance affects employment decisions comes from an analysis of the relationship between earnings and changes in Medicaid eligibility thresholds. As noted above, section 1619(b) of the Social Security Act allows SSI recipients who work and whose monthly earnings exceed the substantial gainful activity (SGA) level7 to receive Medicaid benefits if their income after certain deductions remains below the 1619(b) eligibility threshold. Stapleton et al. (1998) examined whether some SSI recipients constrain their earnings to stay below the eligibility threshold for receipt of Medicaid. Controlling for other factors, the authors find strong evidence that some SSI recipients who work substantially increase their earnings as the threshold increases, suggesting that they, in fact, keep earnings at or below the Medicaid eligibility level.8

Because of the high value of health insurance to people with disabilities, the availability of Medicare and Medicaid could induce individuals to leave the labor force in order to qualify for these programs. Presumably, individuals would leave either to gain access to superior coverage, or to gain access to any coverage (for individuals who do not receive coverage through employers and who cannot afford to pay for coverage). To date, however, no studies have demonstrated this effect.

C. The Evolution of Programs and Policies

Historically, disability policy in the U.S. adhered to a framework that distinguished individuals by an administrative definition regarding the ability to work. Individuals determined as having a limiting condition that prevented substantial work received benefit payments designed to replace lost wages. Individuals whose limiting condition was not deemed sufficient to prevent work received no benefits (although they may have been eligible for income maintenance, rehabilitation services, or other benefits through a variety of other programs). Over time, efforts were introduced to promote return to work among DI and SSI beneficiaries, such as encouraging participation in vocational rehabilitation and introducing program features designed to protect cash and health insurance benefits for a time following a return to work. Even so, return-to-work efforts have met with very limited success, with only about one half of one percent of all DI beneficiaries having left the rolls for employment (GAO, 1997).

More recently, a fundamental shift has occurred within disability policy design. Rather than emphasizing the provision of services to individuals deemed unable to work, disability policy has assumed more of a civil rights framework, emphasizing a right to equal access to employment. The primary legislation establishing this framework was the 1990 Americans with Disabilities Act, which guarantees access for people with disabilities to public and private buildings, vehicles and services, including a right to the provision of reasonable accommodations within the workplace to ensure equal employment opportunities.

Other recent legislation promotes increased independence among people with disabilities, not only within the community but in designing and selecting needed services and supports. For example: the 1999 Ticket to Work Act features, among other provisions, a ticket that a DI or SSI beneficiary can use to secure rehabilitation and training services from a participating employment network (of the beneficiary’s choice); the Presidential Task Force on the Employment of Adults with Disabilities was created in 1998 to evaluate existing federal programs to determine what changes and innovations may be necessary to remove barriers to employment opportunities faced by adults with disabilities; and in 2001, Congress approved a new Office of Disability Employment Policy (ODEP) in the U.S. Department of Labor, which is intended to facilitate the communication, coordination and promotion of public and private efforts to enhance the employment of people with disabilities.9

This recognition of the right to employment in disability policy is evident in several health insurance provisions contained in legislation over the past two decades. As noted above, the fear of losing eligibility for public health insurance is frequently cited as a major barrier to work among people with disabilities. Because healthcare costs are often extremely high for people with disabilities, the cost of health care can often outweigh the financial benefits of a job that does not provide comprehensive health insurance coverage if public coverage is lost. For many individuals with disabilities, particularly those who are not capable of working a full-time job that would provide health benefits, employment is simply not a financially viable option. Several health insurance provisions contained in legislation over the past two decades are intended to improve this situation. These provisions aim to make public health insurance available to working people with disabilities on terms similar to those offered to people with disabilities receiving public assistance so that individuals with disabilities might leave the public assistance rolls without fear of being unable to meet their medical expenses.

1. Social Security Act of 1980

A number of the major health insurance-related provisions were enacted under the Social Security Act of 1980 and affected recipients of both SSI and DI. These provisions represent important early steps toward reducing disincentives to employment.

Section 1619(a) of the Act provides continued Medicaid coverage and reduced SSI payments to recipients who earn more than the SGA amount but whose overall income is below the point where SSI payments (including state supplements) are reduced to zero.10 As noted above, a related provision, section 1619(b) of the Act, allows continued Medicaid coverage and SSI eligibility but with no monthly payments to recipients whose income, after certain disregards, exceeds the state’s break-even point by the average Medicaid spending level for SSI disability recipients in the state. The 1619(b) income limit varies substantially across states because of variation in Medicaid spending and state SSI supplements. In 1996, the threshold was above 250 percent of the federal poverty level for individuals in 21 states (Stapleton et al., 1998). Among SSI recipients who are working, the 1619 work incentive provisions are the most commonly used. In December 2000, 27,542 individuals participated in section 1619(a) and 83,572 individuals participated in section 1619(b), representing about 31 percent of all working SSI recipients and seven percent of all SSI recipients, regardless of work status (SSA, 2000).

For DI beneficiaries, the 1980 Act established the Extended Period of Medicare Eligibility (EPE), which originally allowed DI beneficiaries to work and earn as much as they want for up to four years while maintaining their eligibility for Medicare. DI cash benefits are reduced to zero when earnings reach the SGA level, but during the EPE, beneficiaries can receive DI benefits in any month in which their earnings are below the SGA level. The EPE was extended to eight and one-half years by the 1999 Ticket to Work Act.

Although the goal of the health insurance-related work incentive provisions (section 1619(a), section 1619(b), EPE) is to increase employment while preserving access to health insurance, studies of the impact of the incentive programs reveal mixed results. For example, some have suggested that, although many SSI recipients do at some point participate in 1619(a) or 1619(b), this employment tends to be sporadic. Rupp and Scott (1998) find no evidence that the introduction of the 1619 provisions in 1980 corresponded to a significant increase in income-related suspensions, suggesting that the 1619 provisions have not led to increases in earnings sufficient in both level and duration to result in benefit suspensions. This conclusion is consistent with the finding of Stapleton et al. (1998), noted previously, that a significant share of working SSI recipients constrain their earnings to stay below the cut-off threshold for the section 1619 work incentive program. Although the 1619(b) provision may not provide sufficient incentive to move individuals into permanent employment, it does appear to increase work activity (up to the income threshold).

2. Balanced Budget Act of 1997

Section 4733 of the 1997 Balanced Budget Act (BBA) allows states to offer a Medicaid “Buy-in” option for certain working people with disabilities. States can create an optional eligibility group designed to help people with disabilities who have relatively high earnings but do not qualify for Medicaid under other provisions. Individuals are not required to have been on SSI to be eligible for this Medicaid Buy-in provision. However, the state must make a medical disability determination if an individual was not an SSI recipient. The legislation allowed states to provide the benefit to individuals with incomes up to 250 percent of the Federal poverty standard. States are permitted to deduct certain expenses from income before applying the income test.

3. Ticket to Work and Work Incentives Improvement Act of 1999

The 1999 Ticket to Work Act loosened restrictions regarding the Medicaid Buy-in program established under the BBA. States now have the option to liberalize income, asset, and resource limitations for workers with disabilities who buy into Medicaid. States can also continue to offer the Medicaid Buy-in to workers with disabilities, even if they are no longer eligible for DI or SSI because of medical improvement. States are authorized to require individuals to pay premiums, or other cost-sharing charges, on a sliding scale. Note, however, that the Buy-in program remains optional.

The Ticket to Work Act also provided funding for states to conduct Demonstrations to Maintain Independence and Employment (DMIE). These grants, administered by CMS, allow states to experiment with programs to provide Medicaid coverage to workers with significant impairments that, without medical assistance, will result in disability. The goal of these programs is to intervene early with medical coverage for appropriate treatments and disease management so that the individual can maintain employment and independence. Mississippi and Rhode Island have been granted funds to conduct such demonstrations for persons with HIV and multiple sclerosis, respectively, and a second round of the grant application process is under way.

As noted above, the Ticket to Work Act also extended the EPE from four to eight-and-a-half years. The Act also allows workers with disabilities who have undergone medical screening and secured a Medigap policy--a commercial insurance policy that provides benefits supplemental to Medicare--to suspend the premiums and benefits of the Medigap policy if they have employer-sponsored coverage. During the EPE, workers are able to take advantage of employer-sponsored benefits, an important incentive to work, while keeping their Medigap policies in case their employment attempt fails. This is potentially significant because lapsed policies require re-application and pose a risk that the applicant might be unable to pass the medical screen.

4. Supreme Court Decision in Olmstead v L.C.

The 1999 Supreme Court decision in Olmstead v. L.C., in which two institutionalized mentally retarded women11 sued the Georgia Department of Human Resources under the ADA to receive treatment in a community setting, has increased state responsibility to provide services to people with significant health and personal care needs in the community. Under Olmstead, which interpreted Title II of the ADA and its implementing regulation, states are required to administer their services, programs, and activities “in the most integrated setting appropriate to the needs of qualified individuals with disabilities.12 In response to the Olmstead decision, CMS sent a number of letters to State Medicaid Directors reminding states they have an obligation under Medicaid to periodically review the services of all residents in Medicaid-funded institutions, and to use Medicaid funds to provide appropriate services in a range of settings from institutions to fully integrated community support.13 On June 18, 2001, President Bush issued an Executive Order directing the Secretaries of Health and Human Services, Education, Labor, and Housing and Urban Development to assist states in implementing the Olmstead decision in a timely manner. The Order also directed the Secretaries, the Commissioner of Social Security and the Attorney General to assess agency policies and to look for opportunities to improve the availability of community-based services for qualified individuals with disabilities (Bush, 2001).

CMS has also delivered Olmstead updates to states encouraging them to make use of the Medicaid Home and Community-Based Waivers (HCBS) program, which allows states flexibility to offer different types of services to individuals with chronic disabilities (HCFA, 2001a and 2001b). The HCBS waiver has become a primary mechanism for providing community-based, long-term care services to targeted populations (Lutzky et al., 2000).

While Olmstead was targeted at providing services to reduce the need for institutionalization, many of the services needed to support community living (such as personal care attendants, transportation, and housing assistance) are among those needed by many non-institutionalized people with disabilities to support employment. Expansion of the availability of home and community-based services through Medicaid HCBS waivers is a positive development in many respects for people with disabilities who need such services, but the way they are financed, via Medicaid, could undermine incentives to work. Because for most people with disabilities the best way to obtain Medicaid eligibility is via SSI, the provision of these services via Medicaid increases the value of not working. Medicaid expansions, such as Buy-in programs, that weaken the link between SSI and Medicaid eligibility will help address this issue.


A. Introduction

The findings presented in this section are from focus groups conducted with working people with disabilities in three cities (Seattle, Washington; Newark, New Jersey; and Los Angeles, California) between April and December 2000. All focus group participants were 18 years old or older, had a significant disability with onset prior to first substantial employment, and had annual earnings of at least $8,240 before taxes and transfers. At the time of the focus groups, the latter was the federal poverty line for a family of one (Federal Register, 1999). It is approximately equivalent to working 30 hours a week at the federal minimum wage. A total of 284 individuals participated in focus groups and individual interviews for the study. Basic socio-demographic, disability, and employment information was collected via a telephone screening instrument and a pre-focus group registration form.

A slight majority of participants were male, and their average age was 38 at the time of interview. Just over half (55 percent) had experienced disability onset before age 13. Just over half were single, 61 percent were white, 16 percent were African-American, and 13 percent were of Hispanic ethnicity.

While all had substantial earnings, 23 percent had annual earnings below $10,000. Median earnings were under $20,000.14 Only seven percent had earnings above $50,000. Many lived in households with other income; median household income was about $40,000. The largest impairment category was mental illness (30 percent), followed by communication (21 percent) and mobility (19 percent) impairments.

Focus group participants were asked to rank on a scale of 1 (very important) to 5 (not important) the importance of various supports in helping them find and maintain employment. Access to health insurance received the largest share of “very important” responses, with 68 percent of participants assigning it a rank of 1, and nearly 82 percent of participants assigned it a rank of 1 or 2. Participants with mental impairments were particularly likely to give health insurance a high rank; over 90 percent ranked it as a 1 or 2. Overall, more than 75 percent of participants assigned a rank of 1 or 2 to each of four supports: family and peer encouragement; access to health insurance; skills development and training; and college.

Our analysis of the focus group discussions revealed four major findings with respect to the role of health insurance during childhood and in the employment of people with significant disabilities:

  • access to health insurance was cited as a primary need throughout life;
  • participants commonly experienced detrimental gaps in health insurance coverage;
  • transitioning from public to private health insurance coverage was often difficult; and
  • employment increases the complexity of health care management.

We discuss each of these findings below.

B. Access to Health Insurance a Primary Need Throughout Life

1. Childhood

Access to health insurance during childhood was considered of primary importance by numerous participants, especially among participants with conditions requiring frequent medical attention during youth. For them, access to health insurance was key not only to protecting their own health, but to preserving the financial well-being of the family. One participant reported that his father worked two jobs in order to provide medical coverage for him. Another participant remarked:

  • “If it hadn’t been for my father’s insurance, our family would have been bankrupted by my disability.”

Despite the importance of health insurance, few participants were able to say with certainty whether they had access to public sources of health insurance as children. Among those who could remember receipt of public health insurance, most agreed on its importance. As one participant said:

  • “It was definitely of value to have had SSI when you were in school and too young to work and you needed medications and other assistance.”

Generally, participants were more likely to describe use of private health insurance than public health insurance during childhood, and recipients of private insurance were more likely to identify and discuss the importance of insurance receipt as a critical support.

  • “My mother took me to meet with a psychiatrist for my depression while I was in high school. The private insurance that my parents had through their work paid for my counseling and medication.”

  • “The only medical [expenses] I really had were through my epilepsy and having to go down to University of Colorado in Denver for EEG’s a lot. Also, my constant speech therapy and paying for the medications that I had to take when I was epileptic. My mother was working full-time at the time and I was covered under her insurance.”

  • “I lived in the hospital. I always went to private specialists.” My mom always said, 'You HAVE to have insurance.'”

2. Adulthood

Participants were vocal about the importance of having access to affordable health insurance during adulthood:

  • “In today's society you can't make a move if you don't have insurance…”

  • “[Healthcare] is one of the biggest [issues] for me…”

  • “I can’t say enough about my insurance [through employer]. Like this little gizmo [scooter] costs $2,300. My medication is $20 per day. If it wasn’t for insurance I don’t know what I’d do.”

For those receiving DI or SSI, eligibility to receive public health insurance was cited as one of the most attractive features of benefit receipt:

  • “It's not just Social Security, it's also the medical benefits. When you're mentally ill and you work just part-time, you get SSI, you get Medicare or Medicaid.”

  • “I still have SSI [for my health insurance].”

  • “[In college,] I was on SSI. That's when some changes came about, where you could start making some money on an ongoing basis and then they'd deduct. As long as you were getting $1 in SSI, you retained your Medicaid.”

Numerous other participants emphasized the importance of having access to affordable prescription medication, whether through public or private insurance, as key to maintaining health and functioning within the community:

  • “I can't function normal without [my medication].”

  • “The big thing is the medication.”

  • "The only thing that keeps me on the job is medicine to stay awake.”

C. Gaps in Health Care Coverage Common

Whether enrolled in public or private health care plans, many participants experienced some limitations in coverage (due to policy restrictions, changes in employment or transferring between plans) during childhood and adulthood, with varying consequences. In some cases such limitations led to delayed recovery or financial difficulties, and in other cases they served as impediments to successful long-term employment. Exhibit 3 summarizes the most common medical needs reported by focus group participants, and common health care coverage limitations identified by participants.

EXHIBIT 3. Medical Needs and Coverage Gaps Reported by Focus Group Participants
Medical Needs
Prescription drugs
Physician visits
Medical equipment (Examples: wheelchairs, leg braces, insulin pump)
Physical therapy/rehabilitation
Counseling/therapy sessions
Psychiatric hospitalization
Day treatment and partial hospitalization
Personal assistant services
Special transportation
Gaps in Coverage
Denied employer health care coverage because of disability
Disability related expenses not covered by health insurance
Forced to see different doctor if employer changes health plan
HMO restrictions on seeing specialists; going through Primary Care Provider delays treatment
Insurance limit exhausted (maximum coverage limit exceeded)
Lack of coverage for pre-existing conditions
Lack of prescription drug coverage/high co-pays (i.e. 50% of drug costs)
Limitations on doctors visits (i.e. limited to once per month)
Limited psychiatric visits
No benefits if not working full time
Unable to see the doctor they want/doctor they prefer to see is not covered by employer’s plan
Unable to see the same doctor continuously due to changing employer coverage

1. Lack of Drug Coverage and Eligibility Restrictions Chief Public Health Insurance Limitations

While many DI or SSI beneficiaries cited eligibility to receive public health insurance as one of the most attractive features of benefit receipt, participants identified a number of limitations within Medicare and Medicaid plans that were disruptive, including the two-year waiting period for Medicare eligibility, Medicaid earnings limitations, and in some cases, lengthy approval processes for treatment (“It takes you three months to get an authorization…they deny, deny, deny for what we need”). One of the most frequent complaints voiced about public health insurance, however, was the lack of a Medicare prescription drug benefit:

  • “One thing that I'd think would be helpful is government should have some type of program of subsidy for the medication that you need.”

  • "I’m off Social Security, but I’m still paying my Medicare premiums, so that I still have insurance. But it doesn’t cover any of my meds, and the meds for me are the most important medical benefit that I can have. My husband’s insurance is paying for it. We make too much money to have Medicaid."

  • “[One of] my case manager['s] clients had the choice of buying his meds or paying his rent, and the guy ended up several weeks later in the hospital. It's really terrible money management on behalf of the government and the health insurance companies because the guy’s meds were a couple of hundred bucks, but the hospitalization was probably twenty something thousand dollars. …It's just a nightmare out there, if you can't get the medication you need.”

  • “When I became independent and started having my own benefits in my name, I got what was called a conversion plan from my father's policy. It's health insurance that I had to pay for, but it supplemented Medicare which didn't have any prescription benefits. This had prescription benefits…When I got my first job, I found that it didn't have very good mental health coverage, so I kept this policy through my first job and even afterwards…until I got my current job.”

Others cited eligibility restrictions for public health insurance, which presented obstacles to receiving needed health care services:

  • Because I work part-time, basically, I'm not eligible for any [public] health insurance…”

  • “I’m not going to be able to get any more (Medi-Cal] because I make too much money.”

  • “We make too much money to have Medicaid.”

2. Exclusions and Caps Create Limitations to Private Health Insurance

A number of participants indicated that their insurance didn’t cover all needed medical care. For some, a key limitation of private coverage is the existence of pre-existing condition exclusions, which can restrict access to needed care for six months, a year, or even more:

  • “The problem is, if you have to get a private health plan, then they will not cover you if you have a pre-existing condition, especially a serious one.”

  • The company [would have] paid $100 a month toward the private plan if you didn't want to use their HMO, but I couldn't do that because the private plan didn’t cover pre-existing conditions.”

  • “In the job that I'm in now, I’m getting health coverage, but. . . if it's a pre-existing condition you have to wait six months before you can get put onto the health plan.”

One participant ensured he could retain access to Medicare after employment to secure needed coverage: “I am continuing with Medicare for pre-existing conditions, which are multiple

Other participants identified various caps, exclusions and approval processes that made securing access to ongoing quality care in a timely fashion difficult:

  • “With my current insurance...I had to go a GP [general practitioner]. The GP had to contact a psychiatrist. The psychiatrist had to talk to me and decide that no, he was [not] the proper psychiatrist, suggest another psychiatrist. [It was now] two weeks [after] I had already said I need help.”

  • “My insurance…[only] covers one doctor's visit a month.”

  • “I have…our company's insurance, and…it sucks, they suck. Luckily I got a wife that can stay home and basically battle on the phone, and kind of beat some sense into these people, saying, 'Look the guy needs his stuff, he's got a reoccurring shipment every month. Things aren't [going to change], he's not going to walk tomorrow.’ …The fact that we actually have to go through something like that with an insurance company and battle for the things we need, when here we're paying these premiums, our company here is paying the premiums, and we've still gotta fight for what we should be getting already, it's really bad. Something is upside down there, it's just not the system it should be."

  • “I had private insurance, and the limit was exhausted, so I found myself with no ability to go out and get more insurance. ...It gets to the point where you actually think, 'Well, you know what? It might not be worth it to work.’ I am getting close to that point.”

3. Coverage Limitations Detrimental to Recovery

A number of participants cited coverage limitations that had been detrimental to rehabilitation. For example, a participant with bipolar disorder said that when she was young, frequent changes in coverage resulted in having to go to many different psychiatrists. She believed that not being able to sustain a therapeutic relationship over a relatively long period of time had a negative impact on the efficacy of her treatment. Others said:

  • “Just yesterday I switched to a better doctor, which has some reasonable knowledge of a spinal cord injury. …And not being able to go to [that doctor] with that HMO, it affected me healthwise.”

  • “I went to [a psychiatrist], but you’d only see [her] once every six months. There was a nurse I was seeing. She was a really nice person…but she hadn't been [in practice] very long and I remember she was putting me on this Tegretol and I was having a reaction to it…and she kept on increasing the dose. Finally when I did see this doctor, she said I was over sedated.”

  • “So I lost my doctor as a result of me getting my job, [and] I've not had as good a doctor ever since. …I get a new doctor every six months, [and] with my particular illness, I have to re-train a physician almost every time I have a new doctor. …The logical conclusion is, if I wanted good health, I would have stayed unemployed.”

D. Transitions from Public to Private Coverage Difficult

Participants transitioning from public to private health insurance did so primarily when entering the workforce, and access to health insurance played a key role for many participants in influencing decisions regarding workforce entry. As noted above, because receipt of public health insurance for people with disabilities is typically linked to receipt of DI or SSI, becoming employed can threaten receipt of health insurance. Many focus group participants described struggling with the choice between working and losing DI or SSI eligibility, and retaining secure health insurance coverage:

  • "If the government really wants to help people continue employment and pay taxes, then find ways to get rid of some of the regulations and stupid rules that prohibit people [from working]. Most people I've ever met, it's like, hell, I don't need the $500 that Social Security gives me but I need the Medi-Cal. I can get a good job, but I can't live without my health insurance.”

  • “A lot of people don’t work because they do not want to lose their coverage, but it was a chance that I had to take, I just could not live on SSDI alone. I still do use long leg braces that Medicare pays for.”

  • "...I knew that as soon as I went to work somewhere that I would be off Social Security. So it was real scary because it’s kind of like having a rug come out from under you. I thought if I can’t make it on own...But I just started earning more than $500 a month. I always report my earnings, and one day I got a notice saying it had been discontinued. But the nice thing was they let me keep my Medicare benefits, as long as I paid the premium."

  • “In the past three years, each year I've had some sort of major operation, [and] if I didn't have Medi-Cal, I don't know that I could contemplate what would have happened. ...I got a letter a month or two ago [about] sharing costs. I haven't followed that up. I figured when they learn about it, they'll let me know and until then I'm not in any big hurry to lose my benefits, because I still have a lot of health issues and my job--even though it's federal government--is still considered temporary, so there's no benefits whatsoever. To lose Medi-Cal could be catastrophic."

Many participants described their experiences in searching for employment that would provide access to private health insurance that would be comparable, or superior, to coverage under Medicare or Medicaid.

  • "My family and other people told me 'because of your medical situation, you need to maintain your medical with the state, you're going to have to look for a particular job so you can keep your benefits and maintain your health.'"

  • “In today's society you can't make a move if you don't have insurance…so people that are [looking for work] these days, they want the benefit package. They're looking at employers, [and asking,] 'What kind of an insurance package do you offer?’ When I came here I had to ask the same thing. I had a wife and a kid to worry about.”

  • “My new job, I signed up for group health and I [right away] thought, do they cover the medication? I wanted able to work full-time and still afford my medication. Luckily, I found out that my health plan does cover my medications, but there might be other medications that other insurance plans won't cover, and it's hard for a person to get off a system, want to work full-time and still be able to afford the meds.”

A number of participants said that even though they considered features of private health insurance carefully before accepting an offer of employment, they were not always able to accurately assess benefits, or to secure the level of benefits they desired:

  • “There’s no insurance at all in the new occupation that I picked, [although] I didn't actually know that until after I got the job.”

  • “I had the best doctor in town at [the mental health center, paid by] Medicaid up until the point I got my job. …It was a long time before I realized that [the MH center] was not covered by my insurance, [and] my doctor wasn't being paid by my insurance agency. Then I finally got my bill and…it put me in a lot of debt.”

  • “Back before being employed, I had Medi-Cal, and I had the choice of going to a new doctor. With the HMO, I...couldn't go to that particular hospital anymore.”

Once employed, participants noted that continuous access to sufficient private health insurance was not guaranteed, as some employers might choose to make unanticipated and disruptive policy changes:

  • “I work for a small company, so as health insurance goes up, his policy goes up. He changes, so sometimes when he changes, you're forced to change doctors. But right now, that's the only insurance I have, since I'm no longer qualifying for Medicare or Medicaid."

Among participants with access to needed private health insurance through employment, retaining coverage served as one of the main attractions to continued work, regardless of the circumstances of employment:

  • “I think they're trying to get me to quit because there's only one, as far as I can tell, really, really unpleasant supervisor to work for, [and] after about a year they shifted me to him for no apparent reason hoping he would scream at me and yell at me and chastise me, so that I would just quit. That was seven months ago and I have not quit yet. You want to know why? I need the medical benefits so badly. They're worth more to me than the wages.”

  • “Even though I was qualified with the school district, I kept my own individual insurance because my doctor had told me, when they thought there's a possibility that I might have MS, he said two things. 'Don't ever let your health care lapse. Don't lose your insurance benefits. It's going to be hard to get it back.’ And the other thing is he...told me to keep working.”

  • “Sometimes when…coworkers are just about as insensitive [as they can be]…and I’m just about to walk out that door [and never come back], the Lord just kind of reminded me, 'Chris, come on, you’ve got kids, a family, responsibilities’…The reason people work is exactly what you were saying, insurance coverage…that’s the reason I need to work, I need to be responsible enough as a parent and adult to say, 'All right, so I don’t feel like doing it but I do it because there's a need there.'"

Others described finding that the transition to employment compromised their eligibility for public insurance without gaining the advantages of private coverage:

  • "Because I work part-time, basically, I'm not eligible for any [public] health insurance…and my father's insurance is for really, really big emergencies.”

  • “One of the doctors was telling me, if you were 65, we could get you a lift chair with no problem, but you're working, and you're not 65 and you're not on Medicare, so we can't get that for you. The lift chair I need is between $900 and $1200. I make a decent salary, but we're not where we're able to just plunk that kind of money down to get the kinds of things that we need.”

  • “In the job that I'm in now…you have to wait six months before you can get put onto the health plan. You make too much to get it from Medi-Cal, so you're stuck in the middle. All the money that you make has to be spent on meds and all that kind of the stuff and you hope you don't have to go into the hospital. It'll be six months before I get out of the mine field.”

E. Employment Increases the Complexity of Health Care Management

Because of the potential mismatch between health care needs and the availability of health insurance coverage for working people with disabilities, many participants described work and other management strategies they used to retain health care coverage. Participants frequently managed their earnings in order to retain Social Security benefits and access to public health insurance.

1. Participants Assemble a Patchwork of Programs to Preserve Access to Health Insurance

Many participants described an ongoing concern about losing Medicaid as they approached the earnings limit. For example, one participant said that she only works part time so that she can avoid the loss of her medical benefits. She previously lost her eligibility for SSI because she made too much money, so now she keeps her earnings low enough to maintain her medical benefits. She said she fears working full time and losing her benefits, because she is never sure when her disability may get worse and require her to cut back hours. If this were to happen without access to her current benefits, she would not know what to do.

Several indicated that they had made private arrangements with their employers (and others) to “accommodate” this situation by taking time off work, shifting job responsibilities, working without pay, turning down promotions, or selecting jobs that would allow them to keep earnings low. For example, one participant with a cognitive disability said that his boss keeps tabs for him and tells him when and when not to work to make sure that he does not go over the earnings limit. Another said that she works fewer hours at her job in order to maintain her benefits and still collect SSDI. She said that she chose a minimum wage job so that she could work a maximum amount of hours and still stay under the limit. Others said:

  • “I'm getting Medi-Cal, [but] I'm being threatened all the time to be kicked out [if I] work too much. So what I have done the past few years [is] take vacations whenever I could [so as not to make over a] certain amount of money. My employer is real nice about it, they told me to do whatever I have to do.”

Despite the nature of coverage (public or private), a number of participants indicated that their insurance didn’t cover all needed medical care. Participants said they paid for such care out of pocket, sought coverage through alternative sources, or found unconventional ways to gain access to needed services:

  • “Almost all my healthcare when I was a child was received at Shriners’ Hospital, which is a philanthropic organization. They provide free care for children with disabilities.”

  • “I relied on my parents until I was like 18. When my parents’ benefits stopped, I relied on the public health system, you know, going to free clinics that kind of thing. And, I actually got married because I needed an operation. So that is how I got health benefits.”

  • “I'm on COBRA, which is $500 a month…for three months, that's $1,500. …A lot of people who are not disabled [think they are] not going to be sick during such a short time. But to me, three months--anything can happen. It can be catastrophic to my finances if I got hospitalized just once with something simple, so I have to pay it.”

  • “There might be some clinics that would normally service homeless people that don't necessarily require that you have…insurance. …I think they'll work with you [on medications].”

  • “Pharmaceutical companies have scholarships, also. And all you need to do is write them or ask your pharmacist to call them, send you an application.”

  • “My doctors gave me samples for like, two years.”

Exhibit 4 summarizes approaches reported by participants to gain access to needed coverage.

EXHIBIT 4. Participant Efforts to Gain Access to Health Insurance Coverage
Methods Used to Gain Access to Needed Coverage
Limited earnings to maintain public health insurance benefits by…
  • working part time/limiting the number of hours worked
  • working without pay (if at risk of exceeding maximum earnings)
  • taking vacations from work (if at risk of exceeding maximum earnings)
  • turning down promotions/raises
  • selecting low-paying jobs
Lived with parents to retain parental health care coverage
Married in order to receive spousal health care benefits
Paid for COBRA coverage to avoid uninsured periods
Paid out of pocket for necessary services
Participated in research study to receive medication
Purchased lower cost medications through a mail order company
Received free drug samples from doctor for extended time periods
Set aside money in Medical Spending Account
Stopped taking medication/receiving treatment because could not afford it
Used less expensive alternative treatments or lower quality medical equipment
Used prescription assistance programs (through pharmaceutical companies or charitable organizations)
Used student health services
Went to clinics that provide care free of charge/public health clinics/community mental health clinics

2. Participants Lack Information About Program Restrictions and Criteria

Participants indicated that having medical benefits was critical to managing a disability, but that they often had difficulty obtaining good information about Social Security benefits and, more importantly, about balancing benefit eligibility and work. Rather than risk losing health benefits, several had tried to limit their income (“I hoped I wouldn’t get a raise”) or chose not to work at times. Others sought assistance from third parties:

  • “I can make a maximum of $699 a month, but when I go over that I'm in danger of losing my Social Security, my SSDI. I get benefits counseling from the Job Seekers’ class about that particular issue. They're willing to intervene for me with my job or with my boss if I'm in danger of going over that.”

In some cases, participants reported that they were advised by program personnel to manage earnings. Several reported having been advised by vocational rehabilitation (VR) counselors and others receiving benefits to stay underemployed to keep benefits:

  • "I can remember quite some years ago, I actually had a caseworker tell me...because I kept saying I want to go to work, I want to go to work...she said 'the reality is you can't work because if you go to work, you lose your benefits, you have no medical coverage, you have no health coverage, what are you going to do?' This was a caseworker with DSHS and she said 'I'm telling you this in your best interest.' This was a long time ago because at that time, I would have lost everything.”

  • “Somehow I got off it for a while. And then all of a sudden I got back on Medicaid again.”


A consistent experience of focus group participants was the encountering of gaps in health insurance coverage, typically during periods of transition. As children, a number of participants described coverage gaps stemming from changes in parents’ employment status and during the transition to adulthood. As adults, participants experienced loss of coverage while transitioning to employment, or during transitions from one employer to another. Others described efforts to avoid loss of coverage through a number of approaches, including earnings restraint or continued employment in problematic jobs. As noted above, there have been a number of recent policies to try to address the issues raised by focus group participants related to health insurance coverage. In this section, we discuss the relevance of recent legislation to the findings and the potential implications of the findings for public policy.

A. Expanding Access to Needed Services

1. Implications for the Effectiveness of Ticket to Work Act Provisions

a. Lengthening the Extended Period of Eligibility

As noted earlier, the Ticket to Work Act lengthened the extended period of eligibility for Medicare from four to eight-and-a-half years. This extension should make work more attractive to some DI beneficiaries because it allows them to maintain a longer period of healthcare coverage after they begin working. The actual effects of the new provision will depend, in part, on the extent to which beneficiaries are aware of the provision. A 1995 study, for example, found that only about 11 percent of DI recipients were aware of the extended period of Medicare eligibility, and less than one percent reported that the provision influenced their employment decisions (Hennessey and Muller, 1995). Other studies have found that as many as 80 percent of working DI beneficiaries were unaware of the DI program’s work incentives at the time they returned to work, and many beneficiaries perceived SSA as unresponsive to their desire to return to work (GAO, 1998; Hennessey and Muller, 1994).

The impact of the lengthened EPE will also depend on the extent to which Medicare, alone, addresses the health care needs of DI beneficiaries who return to work. Medicare does not cover prescription drugs, and has significant limits and/or cost-sharing associated with outpatient psychiatric and personal assistance services. For many people with disabilities, these types of services are covered by Medicaid, which is used to supplement the Medicare coverage. The EPE will have little impact if work jeopardizes complementary Medicaid coverage among those who rely on Medicaid for costly and much-needed health care services. Persons with psychiatric disabilities who rely on prescription drugs to manage their conditions might be among those whose employment decisions would be least affected by the lengthening of the EPE.

SSA is now in the process of launching a five-year demonstration to test the effectiveness of providing coverage for prescription drugs and outpatient psychotherapy to DI beneficiaries with affective disorders. The demonstration will evaluate the effectiveness of the supplemental coverage in improving the health and employment outcomes of DI beneficiaries with affective disorders.

b. Medicaid Buy-in Programs

The Ticket to Work Act gave states the ability to broaden access to Medicaid Buy-in programs. The Medicaid Buy-in should allow more low-income workers with disabilities access to affordable health insurance, and to increase earnings to higher levels without loss of Medicaid eligibility. Because the Buy-in does not depend on current or former SSI participation, it reduces the incentive for a person with a disability to withdraw from the workforce or restrict earnings to receive Medicaid benefits through SSI. There is still, however, an incentive to restrict earnings to remain within state-established Buy-in income limits. The success of the Buy-in will depend on many things. First and foremost is states’ willingness to implement such programs. Buy-in programs can require the implementation of features that represent significant departures from the usual operations and experiences of state Medicaid programs. For example, they require that a medical determination of disability be conducted if the applicant was not previously SSI-eligible; the setting of premiums for a target population for whom the expected medical care costs and utilization may be largely unknown; and issuing bills and collecting premium payments from participants. These new challenges, combined with the unknown and potentially high costs associated with such programs, could deter many states from implementing Buy-in programs.

For states that do adopt the Buy-in, its success in improving the employment outcomes for people with disabilities will depend on a number of program design features that are at their discretion, including: asset and earnings limits for eligibility; premiums and cost-sharing provisions; scope of benefits and services provided; the adequacy of provider payments for attracting sufficient qualified providers of various types; the interaction between Medicaid and employer-provided coverage; and outreach/promotion of the program to the target population.

The Ticket to Work Act did establish grants to states, called Medicaid Infrastructure Grants, to provide them with assistance in developing Buy-in programs. The grants are administered by CMS. To qualify for such grants, states must offer, or be in the process of establishing, personal assistance services capable of supporting full-time competitive employment, reflecting the intent of the Ticket to Work Act to expand supports that promote employment of people with disabilities. Because Medicaid programs have typically not been involved in employment issues, CMS is emphasizing among grantees the need to take a broad look at the programs and policies affecting the employment of people with disabilities in their states, and the potential for inter-agency collaboration in developing and implementing Medicaid Buy-in programs. The Presidential Task Force on Employment of Adults with Disabilities has recommended that CMS encourage states to implement the Medicaid Buy-in by providing technical assistance to states and by encouraging interstate communication. It could be several years, however, before a significant number of states have implemented Buy-in programs, or until states have gained enough experience with such programs to implement them in a manner that has a significant impact on the employment of people with disabilities.

2. State Children’s Health Insurance Program

Most focus group participants indicated that they relied on their parents’ health insurance coverage, rather than Medicaid, during childhood. This could be for a number of reasons: Medicaid coverage via SSI eligibility was not yet available;15 participants were ineligible for SSI and/or Medicaid, partly because child eligibility requirements for SSI were much more restrictive before 1990; or because participants were eligible but unaware of the programs. It is clear, however, that without health insurance coverage for a child with a disability, many of the families of the focus group participants would have been unable to adequately care for their children, or would have been bankrupted in the process.

Since the time that most focus group participants were children, there have been several expansions of Medicaid to cover children with and without disabilities. The most recent of these is the State Children’s Health Insurance Program (SCHIP) established under the 1997 BBA. SCHIP is considered to be the largest expansion of coverage to children in the past 30 years. SCHIP enables states to expand coverage to uninsured children whose families earn too much for Medicaid. It builds on the Medicaid program, which covered approximately 20.2 million children in 1998. Because Medicaid allows states flexibility in determining eligibility, states currently cover children whose family incomes range generally from below the federal poverty level (FPL) to as high as 350 percent FPL. The majority of traditional state Medicaid programs covered children in families between 100 and 150 percent of the FPL. Under the SCHIP program, states may either cover children in families whose incomes are above the Medicaid eligibility threshold but less than 200 percent of the poverty level, or up to 50 percentage points over the state's current Medicaid income limit for children. Most states provide SCHIP coverage for children in families at or above 200 percent of the poverty level (U.S. Department of Health and Human Services, 2001).

States were initially slow to implement SCHIP programs, and the effectiveness of such programs is, as yet, undetermined. It is likely, however, that these programs will be particularly important to and utilized by families with children who have health conditions and impairments not severe enough to meet SSI eligibility criteria. Their effectiveness, like that of the state Medicaid Buy-in programs, will depend heavily on the way individual states choose to implement and promote the programs.

B. Awareness and Use of Work Incentive Provisions

Several barriers may have prevented beneficiaries from being aware of and/or understanding the programs:

  • The provisions are complex, and those related to Medicaid coverage vary considerably across states;

  • SSA field office staff lack adequate understanding of the provisions themselves to be able to provide beneficiaries with accurate information;

  • Beneficiaries come in contact with an array of service providers and others (physicians, mental health counselors, VR counselors, job coaches, peers with disabilities) who influence their program participation and employment decisions but who may lack adequate understanding of work incentive provisions; and

  • Many beneficiaries distrust SSA.

Acknowledging some of these barriers, the Ticket to Work Act Benefits Planning, Assistance, and Outreach (BPAO) grants to state or community-based organizations to provide information to DI and SSI beneficiaries about what happens to their benefits as they return to work, and the mechanisms available to maintain cash benefits and/or health insurance coverage while working. BPAO grant recipients are required to attend an extensive training on DI and SSI work incentive provisions sponsored by SSA.

SSA is also training staff for a new position (called the Employment Support Representative) to be implemented and tested in selected field offices nationwide. This individual will specialize in work incentive issues and be available to provide accurate information to beneficiaries who are exploring the possibility of returning to work, as well as those who have already begun working.

While these efforts represent a significant step in the right direction, they are likely to be insufficient, at least in the short-run, for several reasons:

  • They are relatively small-scale efforts. BPAO grants and training are provided to only a small number of organizations in each state. There are a wide range of service providers who come in contact with beneficiaries and influence their employment and program-participation decisions, and it is likely that without extensive training in the complex program interactions and eligibility criteria, these individuals lack sufficient knowledge of new and existing provisions to appropriately counsel beneficiaries.

  • Assistance and information will be targeted to SSI and DI beneficiaries. While BPAO grantees are able to provide training to staff of other organizations that serve people with disabilities, they are intended to provide direct services only to individuals who are SSI or DI beneficiaries. People with disabilities, not eligible for DI or SSI, may lack resources for such information or assistance.

  • Many new provisions to promote employment are being implemented simultaneously. In addition to the ones noted previously (EPE extension, Medicaid Buy-ins, DMIE projects, BPAO activities) there are a number of other provisions in the Ticket to Work Act not specifically related to health insurance that serve to continue benefits. These include:

    • Expedited re-instatement of benefits, where former DI/SSI beneficiaries can request a re-instatement of benefits if terminated because of work activity in the past five years. Beneficiaries applying for benefit re-instatement will receive provisional benefit payments for up to six months while the re-determination of eligibility is being made, and will not be required to pay back these payments if re-instatement is denied.

    • The Ticket to Work program, where eligible beneficiaries are given tickets that may be used to obtain employment-related services from participating providers, called Employment Networks (ENs). ENs will be reimbursed based on beneficiary employment outcomes and will be encouraged to provide a wide range of traditional and non-traditional employment supports, which could include health-related services not covered by a beneficiary’s health insurance.

    • Waiving continuing disability reviews (CDRs) during the period a beneficiary is participating in the Ticket to Work program.16

    • Eliminating work activity as a criteria for selection for a CDR.

    • Demonstrations that will be conducted to test whether specific provisions promote employment among beneficiaries and applicants.17

It could be some time before sufficient numbers of service providers are aware of the range of employment supports and work incentive provisions available to people with disabilities.

A potentially important state use of the Medicaid Infrastructure Grants, discussed above, is to develop outreach activities that target low-wage workers who are not SSI or DI beneficiaries, but might qualify for Medicaid in some other way, including under a Buy-in program. Early awareness of these programs might help significant numbers of workers to overcome job and other transition problems like those described by the focus group participants, and help them prevent, or at least postpone, a slide into dependency on DI or SSI. CMS efforts to promote state inter-agency cooperation in the development and implementation of Buy-in programs are an important first step of an outreach strategy. Service providers and others who are direct points of contact with people with disabilities need to know about these programs to be able to effectively identify and refer potentially eligible candidates. To help increase awareness and use of work incentive provisions, the Presidential Task Force on Employment of People with Disabilities has recommended that HHS, DOL, SSA, and the Rehabilitation Services Administration form an interagency workgroup to develop a consumer outreach campaign to increase knowledge and use of incentive programs. The Task Force has recommended that the campaign include the development of user-friendly consumer guides identifying benefits and demonstrations available at the federal and state level, and any work incentive provisions associated with those programs.

Another recommendation of the Task Force, which might also serve to diminish the barriers to the use of work incentive programs described above, is for SSA and CMS to develop and implement a plan to actively seek out consumer input and assessing the impact of their regulations on the lives of people with disabilities. Task Force members point out that people with disabilities may be in the best position to determine problems or difficulties with a program, and develop workable solutions, but that currently there is no organized forum for consumers to provide such input.


  1. In 2000, the part B monthly premium was $45.

  2. For DI beneficiaries participating in the nine-month Trial Work Period (during which benefit receipt is not jeopardized by earnings), the EPE begins when the Trial Work Period is initiated.

  3. These states include Alaska, California, Connecticut, Hawaii, Iowa, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New Mexico, Oregon, South Carolina, Tennessee, Vermont, and Wisconsin.

  4. Formerly the Health Care Financing Administration (HCFA).

  5. AFDC was replaced by the Temporary Assistance for Needy Families (TANF) program in 1996 with the passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA).

  6. These findings are based on data from the 1984 and 1986 Survey of Income and Program Participation (SIPP) and, therefore, may not be representative of effects in the current program environment.

  7. To be eligible for either SSI or DI, earnings must be below the SGA level. As of January 2001, the SGA level is equal to $740 monthly. It is adjusted annually based on increases in the national average wage index.

  8. See Stapleton et al. (1997) for a review of information and studies on the relationship between employment and health insurance coverage.

  9. The Presidential Task Force has since been integrated into ODEP.

  10. SSI benefits are reduced $1 for every $2 of earnings, after certain income disregards.

  11. Both women were diagnosed with mental illnesses, as well. One suffered from schizophrenia, and the other suffered from a personality disorder.

  12. Olmstead v. L.C., 527 U.S. 581 (1999).

  13. Letter to State Medicaid Directors, dated January 14, 2000.

  14. All earnings and income medians reported are approximate because participants reported income in ranges.

  15. The federal SSI program covering disabled children was established in 1974.

  16. CDRs are conducted periodically to assess whether a beneficiary is still medically eligible for SSI and/or DI.

  17. These include a demonstration to test the impact of reducing DI benefits by $1 for every $2 of earnings over a specified level, instead of the wholesale loss of benefits when earnings exceed SGA, and demonstrations to try to manage disability and prevent the need for coming onto the disability rolls among disability applicants.


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