Medicaid Coverage 'Cliff' Increases Expenses And Decreases Care For Near-Poor Medicare Beneficiaries

Abstract

Cost sharing in traditional Medicare can consume a substantial portion of the income of beneficiaries who do not have supplemental insurance from Medicaid, an employer, or a Medigap plan. Near-poor Medicare beneficiaries (with incomes more than 100 percent but less than 200 percent of the federal poverty level) are ineligible for Medicaid but frequently lack alternative supplemental coverage, resulting in a supplemental coverage "cliff" of 25.8 percentage points just above the eligibility threshold for Medicaid (100 percent of poverty). We estimated that beneficiaries affected by this supplemental coverage cliff incurred an additional $2,288 in out-of-pocket spending over the course of two years, used 55 percent fewer outpatient evaluation and management services per year, and filled fewer prescriptions. Lower prescription drug use was partly driven by low take-up of Part D subsidies, which Medicare beneficiaries automatically receive if they have Medicaid. Expanding eligibility for Medicaid supplemental coverage and increasing take-up of Part D subsidies would lessen cost-related barriers to health care among near-poor Medicare beneficiaries.

Exhibit 2:

Out-of-pocket medical spending above and below the Medicaid eligibility threshold Source: Authors’ analyses of the 2008–2016 biennial waves of the Health and Retirement Study linked to Medicare enrollment and claims files from 2007–2016. Notes: Scatterplot shows unadjusted levels of out-of-pocket medical spending by the income of Medicare beneficiaries. Estimates adjusted for HRS survey weights. The fitted regression lines and 95% confidence intervals (superimposed on the scatterplot) represent the relationship between income and out-of-pocket spending above vs. below the eligibility threshold for Medicaid supplemental coverage (100% FPL). The vertical distance between the fitted regression lines at 100% FPL gives the unadjusted discontinuity in out-of-pocket medical spending. We excluded respondents whose income was within ±4 percentage points of this threshold. See the Appendix for plots of all study outcomes and of the receipt of supplemental coverage. Estimates are based on 9,599 respondent-years.