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The Impact of Reducing Basic Oregon Health Plan Eligibility to 80 Percent of Poverty

Report
June 15, 1999 Download PDF

The Oregon Health Plan (OHP) was designed to provide Medicaid coverage to all Oregon families with incomes below the federal poverty level (FPL). Prior to OHP implementation, Medicaid for poor families was limited primarily to families who were also receiving welfare. In creating the OHP, the Legislative Assembly specifically provided that all persons below the federal poverty level would be eligible for the OHP Medicaid plan. (1)

The poverty guidelines are used as a basis for determining eligibility for certain federal and state programs such as: Head Start, the Food Stamp Program (130% of poverty), the National School Lunch Program, the Low-Income Home Energy Assistance Program, the Oregon Working Family Child Care Credit (200% of poverty), and the Oregon Health Plan. Unlike measures of income such as "median family income," the poverty guidelines are based on the size of the family.

poverty table

The Legislative Assembly is considering lowering OHP eligibility to 80 percent of poverty in order to divert $15.6 million to other areas in the state budget. If the Legislative Assembly reduces basic eligibility to 80 percent of poverty, approximately 10,000 Oregonians below poverty will lose coverage, increasing the number of persons below poverty without insurance. The proportion of people below poverty who are uninsured increased from 1996 to 1998. Reducing eligibility to 80 percent of poverty will further increase the uninsurance rate among Oregon's poor.

Oregon's increase in the minimum wage should lead policy makers to consider increasing income eligibility for the OHP. As Oregon's minimum wage has increased, fewer families with full-time workers are eligible for the OHP. At $5.15 per hour, the federal minimum wage, two-person households with one full-time worker would be eligible for the OHP. With the minimum wage at $6.50, however, two-person households are not eligible.

Lowering the income eligibility limit to 80 percent of poverty will exacerbate the problem of fewer families maintaining eligibility while working at minimum wage. A three-person family with one full-time minimum wage worker will lose eligibility for the OHP.

As expected, the OHP has proven to be an important component of Oregon's welfare reform strategy. Many individuals no longer face the choice of remaining on government assistance and retaining health coverage, or taking a minimum wage job and losing access to health coverage. The OHP has become a tool for encouraging welfare avoidance. Many three-person families who will lose coverage under the proposal to reduce eligibility to 80 percent of poverty have only one parent. These families may be forced to look to public assistance to obtain medical coverage, undermining the welfare avoidance effect of the OHP.

The average starting wage for welfare recipients entering employment was $7.30 per hour during the first quarter of 1999. Under current law, families with one wage earner at that average wage and with fewer than four persons have too much income to maintain OHP coverage. If the OHP income eligibility limit is lowered to 80 percent of the poverty level, no family with one wage earner at $7.30 per hour and fewer than five people would be eligible for the Oregon Health Plan.


Notes.

See ORS 414.025(2)(s).The Legislative Assembly also provided that certain individuals, such as pregnant women, would maintain OHP Medicaid coverage at incomes above the poverty level. (top)

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Posted in Health Care.

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