When a Child Is Eligible for Medicaid But the Parent Isn’t

I saw this story over the weekend.  It discusses an unfortunate loophole in the Affordable Care Act whereby a child is eligible for Medicaid (and therefore ineligible for premium support on a state exchange), but the parents aren’t, oftentimes meaning that the family can’t go to the same doctors.  I was curious as to whether this was a problem in Colorado, so I pulled up the eligibility chart.

Here it is.  And yes, this could be a problem, but probably only at the margins.  Children will be eligible for Medicaid if they come from a household with a modified adjusted gross income (MAGI) 142 percent of the poverty line or less.  (Note: There is a 5 percent income disregard when determining MAGI, so the child eligibility limit effectively is 147 percent.)  The exact amount depends on the size of the household, but for a family of four, it’s $2,787 a month.  Adults, in contrast, must have an MAGI less than 133 percent of the poverty line (effectively 138 percent because of the disregard).  For that same family of four, that’s a household MAGI of $2,611.  That means that if the household’s annual income is more than $32,981 and less than $35,204 (those figures add back in the income disregard), it’s going to fall in the hole where the kids have to get health coverage from Medicaid and the adults have to go on Connect for Health Colorado.

Some may object, arguing that it may be inconvenient to have different doctors, but the kids on Medicaid will get free health care.  Sure, but it’s not as big of a benefit as one might imagine.  It’s actually no benefit at all.  According to this really awesome subsidy calculator by the Kaiser Foundation, the average silver plan policy for the hypothetical four-person family in Colorado making $34,000 a year would run $1,248 in out-of-pocket costs (i.e., after the premium support subsidies) if it covered just the parents.  That same average policy would be – you guessed it – $1,248 if you add the kids.  This should make sense, because the subsidies are intended to cap out-of-pocket costs at a percentage of income, which goes up as the income increases and, in both of my examples, the family makes the same $34,000.  The actual premiums for the hypothetical family are substantially higher covering the kids – $8,324 vs. $5,338 – but the family doesn’t see them.

Here’s the craziest part of this.  Adding those two kids to their parents’ policy costs $2,986, even though the parents won’t see the increase.  But that’s still money going into the insurance company’s pocket – and for two insureds who are unlikely to cost much (kids tend to be healthy) – so the insurer will be happy to take the additional business.  And how much will it cost Medicaid to have them enroll?  According to this report from the Centers for Medicare & Medicaid Services, in 2011, the average child on Medicaid cost $2,851.  So you have a situation where the parents would prefer their children to be on their policy, the insurance company would prefer for the kids to be on the policy, and it costs the state and federal governments almost twice as much for the government to put them on Medicaid and not have them on the policy.  I can think of a few choice words to describe this mess.

This needs to be fixed ASAP.  Yes, the number of Colorado households in the couple-thousand-dollar sweet spot probably won’t be enormous, but everyone would benefit if we could avoid this fiasco.

Image courtesy of Flickr by Spirit-Fire