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Considerations in Medicaid Cost Sharing Policy

Issue Brief
September 16, 2005 Download PDF

Recent policy discussions about improving Medicaid have included the idea of allowing states to increase the amounts that low-income beneficiaries are charged for premiums, deductibles, co-insurance, and co-payments. Proponents maintain that this “cost sharing” would promote personal responsibility by making people accountable for more of the cost of their care.1.

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Considerations in Medicaid Cost Sharing Policy (PDF)

Oregon knows from experience that this approach is wrong. Increased cost sharing would force a substantial share of Oregon Health Plan recipients to lose their coverage. Some of these former recipients would be forced to forego needed medical care, making them sicker. Some would be forced to delay care until an emergency strikes, requiring more expensive procedures. Hospitals and health clinics would face increased uncompensated care, pushing up health care costs for insured Oregonians.

Current Federal law already allows states to impose cost sharing on some groups, but within limits.

Federal Medicaid law does not allow cost sharing for children, pregnant women, and very poor elderly and disabled individuals. However, nominal cost sharing is allowed for other populations, including parents. Under current federal regulations, deductibles may not exceed $2 per month per family; and co-payments may range from $0.50 to $3.00 per service or prescription. Co-insurance payments may not exceed five percent of the state’s payment for the item or service.2.

Even when insured, low-income individuals already devote a substantial share of their incomes to health care costs.

A recent analysis by Center on Budget and Policy Priorities found that adult Medicaid beneficiaries pay about three times the share of their income on health care as their higher income counterparts with private insurance. If they have a disability, they pay eight times as much.3. Out-of-pocket medical expenses include deductibles, co-payments, and expenses not reimbursed by insurance.

New and increased premiums resulted in dramatic loss of enrollment in Oregon and in other states.

In 2003, under a waiver of federal Medicaid regulations, Oregon increased premiums for poor adults in the Oregon Health Plan. Following this change, enrollment dropped from over 100,000 to roughly 50,000. An analysis of the decline shows that there were enrollment losses among all those subject to the increased premiums, but losses were steepest among those with the lowest incomes. In focus groups, people losing Medicaid coverage cited problems affording the premium, as well as problems adhering to the strict payment policy, as the primary factors leading to their coverage loss.4.

Premiums disproportionately impacted those with the lowest incomes, but also led to loss of Medicaid coverage among those with incomes above 150% of poverty.

In January 2002, under a Medicaid waiver, Rhode Island began charging families with incomes above 150% of poverty premiums ranging from $43-$58 per month, based on income. Nearly one in five families lost Medicaid coverage due to nonpayment over the next three months, and nearly half of surveyed families reported inability to afford the premium as the reason for losing coverage.5.

In Oregon, new and increased co-payments for services and drugs led to unmet medical need and financial stress, even when amounts were nominal or modest.

A survey of poor adults subject to increased cost sharing showed that, among those with unmet needs, over a third (35%) could not get needed care due to cost.6. Additionally, research also shows this population experienced greater medical debt.7.

Imposing increased cost-sharing requirements on low-income populations is counter-productive and works against widely-embraced public health goals.

Increased cost sharing for low-income working adults makes it difficult for them to act responsibly and secure the care they need to treat health conditions such as diabetes and asthma before they become more serious and costly, and before they interfere with work. Too often their health needs compete with other basic survival needs, such as housing and nutrition. For low-income families with children, the additional costs make it difficult for parents to secure preventive and other health services that are critical to a child’s development.

Increased cost sharing and associated losses in coverage resulted in new burdens for providers.

Following the loss of Medicaid coverage by about 50,000 people in 2003, Oregon saw a substantial increase in emergency room use by uninsured patients.8. Uncompensated care has significantly increased for many Oregon hospitals and clinics. Limiting access to services through cost sharing, particularly outpatient care, may result in higher costs overall, if more expensive services, such as hospital care, are used instead.

Oregon is now rethinking its cost sharing policies in the face of growing uninsurance, deteriorating health among poor Oregonians and the associated social costs.

The 2005 Legislature agreed that increasing health care costs for Oregon’s poorest residents is bad policy. The 2005 Legislature prohibited premiums for people with incomes below 10% of the Federal Poverty Level.9.

Endnotes:

  1. National Governors Association, Medicaid Reform: A Preliminary Report, June 15, 2005.

  2. Artiga, Samantha and Molly O’Malley. Increasing Premiums and Cost Sharing in Medicaid and SCHIP: Recent State Experiences, Kaiser Commission on Medicaid and the Uninsured, May 2005.

  3. Ku, Leighton and Matthew Broadus, Out of Pocket Medical Expenses for Medicaid Beneficiaries are Substantial and Growing, Center on Budget and Policy Priorities, May 31, 2005. Analysis of Medical Expenditure Panel Survey data.

  4. Artiga, May 2005.

  5. Ibid.

  6. Ibid.

  7. Wright, Bill J., et. al., “The Impact of Increased Cost Sharing on Medicaid Enrollees,” Health Affairs, 24:4, 1106 – 1116 (July/August 2005).

  8. Ibid, endnote 2.

  9. See Enrolled Senate Bill 782 (2005).

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