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H E A L T H  I N S U R A N C E  F O R U M : 
M E D I C A I D
W E B  E X C L U S I V E   

27 August 2003  
  

A New Medicaid Program

A proposal for a new state-federal partnership that bridges some large gaps in eligibility and coverage among the states.


by Lynn Etheredge and Judith Moore

ABSTRACT:

This paper suggests a new federal-state partnership—a new Medicaid program—for coverage of the uninsured and long-term care. It discusses national eligibility standards, based on financial need (rather than categorical eligibility); buy-ins and reinsurance for high-risk populations; a national strategy of “Medicaid plus tax credits” to cover the uninsured; Medicaid long-term care with expanded eligibility, better financial protection, and home and community-based care benefits; quality initiatives; administration; and possible financing sources (such as estate taxes and an increased Social Security Disability Insurance wage base). Without a new mission and national standards, Medicaid will continue to grow in a patchwork fashion with huge gaps and inequities.

Medicaid has outgrown its original design as medical aid for welfare cash-assistance populations. It is now the nation’s largest health care financing program, enrolling more than fifty-one million people and spending $258 billion in 2002.¹ Prompted by discussions that began in Health Affairs (January/February 2003), this paper outlines a new Medicaid program with expanded missions, national standards, and more national financing. A new Medicaid program could offer health insurance for lower-income people based on need and integrate Medicaid coverage with new health insurance tax credits. It could offer self-directed home and community-based care for disabled people of all ages, within a new financing framework for long-term care benefits. It could be accountable for improving the health of its enrolled populations.

Medicaid already is much different than it was in 1965—and it is already, in many respects, more like this proposed new Medicaid program than its original design. Medicaid is no longer a welfare program only for cash-assistance populations. Already more than half of its enrollees are not cash-assistance recipients.² Nor does it rely only on direct vendor payments to health care providers; as of 2002 more than 40 percent of its beneficiaries were in Medicaid managed care plans.³ Nor is it important only as an acute medical care program; it pays for nearly half of the nation’s nursing home expenses.⁴ Many progressive states have been creating models for new Medicaid programs, using Medicaid options, Medicaid waivers, or their own funds.⁵ A blueprint for Medicaid’s future can incorporate the best state initiatives into the design for a new national program—and provide more federal financing to expand state Medicaid programs.

National standards have always played a critical role in Medicaid’s development, in coverage (for example, infants and pregnant women), in benefits (for example, nursing homes), and in quality (for example, long-term care facility regulations). Despite such important federal initiatives, Medicaid has grown in patchwork fashion, with much diversity among states. Without a national framework, there will continue to be indefensible coverage gaps and inequities, even as Medicaid spending continues to rise.
These suggestions for creating a new and exciting Medicaid program build on many ideas and initiatives for modernizing the Medicaid statute.⁶ Key design issues for a new Medicaid program are discussed below in the sections that deal with coverage of the uninsured, improved care for disabled populations, quality of care, and Medicaid management.

Covering The Uninsured

A new Medicaid program will need federal legislation to resolve a number of serious statutory impediments, in order to create a new “needs-based” Medicaid program for all low-income populations and to ease the problem of uninsurance for working Americans by coordinating this new Medicaid program with new health insurance tax credits.

Needs-based Medicaid. In a needs-based Medicaid program, eligibility would be based primarily on need for financial assistance to pay for medical care. To realize this vision, new Medicaid would differ from today’s Medicaid in three major ways: (1) The anachronism of “categorical” eligibility would be eliminated; (2) national eligibility standards, related to the federal poverty level, would be established and raised over time; and (3) national spend-down eligibility, buy-ins to Medicaid as a high-risk pool, and Medicaid as reinsurance for catastrophic cases would be established to complete the safety net.

Eliminating categorical eligibility. The largest gaps in health insurance for low-income populations are in groups that are not “categorically eligible” for Medicaid coverage. The concept of categorical eligibility is a relic of the public welfare laws of the 1930s. In that period, public welfare programs were limited to people who could not or were not expected to work: aged, blind, or disabled people and single mothers with children. Thus, the Medicaid law excluded most family units having a person who was expected to work: single adults, couples, and two-parent families, regardless of their incomes or the size of their medical bills.

Over the past thirty-five years Medicaid eligibility has expanded by the addition of new eligibility categories and by liberalization of income and asset tests. The Medicaid statute now mandates eligibility for twenty-eight different categories of people and allows states to cover up to twenty-one optional eligibility groups.⁷ The welfare reform legislation replaced Aid to Families with Dependent Children (AFDC) with a time-limited Temporary Assistance for Needy Families (TANF) benefit with return-to-work provisions, and it explicitly broke the eligibility link between AFDC welfare eligibility and Medicaid for families. Under Section 1931 of the Social Security Act, states can extend Medicaid coverage to two-parent families; all states are now using this option to some extent. With the elimination of categorical eligibility, a new Medicaid program could extend health insurance coverage to all low-income populations, including couples without children and single adults.⁸

National eligibility standards. Medicaid eligibility, reflecting state options, still frequently lags below the federal poverty level. To establish national minimum standards for all Medicaid-eligible people, a new Medicaid program, in addition to extending to the groups described above, could have the following upgrades.

(1) Adults over age sixty-five: Medicaid does not now have a national eligibility standard for senior citizens, and most states keep eligibility below the federal poverty level.⁹ In most states senior citizens qualify for Medicaid if they receive federal Supplemental Security Income (SSI) benefits. However, SSI eligibility is only about 75 percent of the federal poverty standard for singles (89 percent for couples).¹⁰ As a result of a political compromise when SSI was enacted, seniors who live in eleven so-called 209(b) states usually have more restrictive Medicaid eligibility standards. To partly deal with subpoverty Medicaid eligibility, the federal government has mandated limited benefits for several groups of Medicare beneficiaries, including qualified Medicare beneficiaries (QMBs), who have incomes below 100 poverty of poverty but who are not eligible for Medicaid, and specified low-income Medicare beneficiaries (SLMBs) (100–120 percent of poverty). These and several other smaller groups are entitled to have Medicaid programs pay some or all of their Medicare premiums and cost sharing, although they are not entitled to other Medicaid benefits. A new Medicaid program could establish national Medicaid eligibility for all senior citizens below poverty, and perhaps to higher levels, such as 135–150 percent of poverty, since low-income seniors often cannot afford Medigap coverage (Exhibit 1).

(2) Disabled people under age sixty-five: The same inadequacies of Medicaid exist for disabled and blind adults under age sixty-five as for elderly SSI recipients. Medicaid eligibility is tied to (below-poverty) SSI eligibility, 209(b) states have more-restrictive conditions, and there are limited QMB/SLMB-type benefits for Medicare-eligible people.¹¹ New national eligibility standards of 100 percent of poverty and higher could better assist disabled populations.

(3) Adults in families with dependent children: State-set Medicaid eligibility now falls farthest below national poverty levels for adults in families with dependent children. Except for pregnant women, the average Medicaid income standard for adult eligibility is only about 41 percent of poverty.¹² It is not unusual for adults and children in the same family to have a different Medicaid eligibility status. Making the federal poverty level a national Medicaid eligibility standard for adults, as well as for children, is long overdue. In 2002 the poverty level for a family of three was $14,494 and $18,244 for a family of four—far too little income to afford family health insurance premiums that averaged over $7,950 per year.¹³

Raising federal minimum standards. Once the principle of minimum national eligibility standards for Medicaid is adopted, where should those standards be set? In the above examples, we suggest that the initial floors be at least 100 percent of the federal poverty level for adults, and higher for seniors and for younger people with serious long-term disabilities. These standards could be phased in over several years; phased-in eligibility was used to raise coverage of low-income children to the poverty level. The standards would not affect states’ ability under current law to expand eligibility beyond these minimums. Higher federal Medicaid eligibility levels are also possible to encourage greater take-up rates for enrollment in the State Children’s Health Insurance Program (SCHIP).

Spend-down eligibility. To function effectively as a national safety net, a new Medicaid program could also include “spend-down” eligibility, ensuring that a person or family could qualify for Medicaid if income, after deducting medical expenses, met national eligibility standards. Medicaid now includes spend-down eligibility as a state option only, not as a national standard. Some thirty-nine states have taken advantage of Medicaid medically needy options with spend-down provisions to extend eligibility to higher income levels than basic Medicaid covers.

Nevertheless, Medicaid’s spend-down provisions, even when available, offer “second-best” protection in that they help only after an illness and financial catastrophe. Also, they are hideously complex and vary dramatically from state to state. A uniform national Medicaid spend-down provision could offer greater protection if it were designed as “income-related” catastrophic insurance. People could qualify for Medicaid if their health care expenses exceeded a certain percentage of their income, on a sliding scale. For example, at 150 percent of poverty, a family might qualify for Medicaid by spending down 15 percent of income (rather than spending one-third of its income on medical expenses, if 100 percent of poverty were the basic federal standard).

Buy-ins to Medicaid, high-risk pools, and reinsurance. A new Medicaid program could expand affordable coverage by offering buy-in opportunities for individuals and families who cannot obtain affordable health insurance. This is now a state option for some people with disabilities. It could be a basic feature of future Medicaid for all state residents; for example, they could buy into Medicaid at 150 percent of a state’s community rates. Medicaid funding could also be available for subsidy of qualified state high-risk pools. State and federal subsidies are now woefully inadequate to meet the subsidy costs of such pools.¹⁴ Finally, Medicaid could offer reinsurance coverage for all catastrophically high-cost cases, to help keep private health insurance coverage affordable and to assure that adults and children with such costly needs can get access to Medicaid’s benefits and specialized networks.

Financing reforms. A final element in Medicaid expansions will be to finance the added expenses. The federal-state matching formula is poorly suited for a national expansion strategy. It is based only on state per capita income—lower-income states get higher match rates (for example, 77 percent in Mississippi), and higher- income states get a minimum 50 percent matching rate. Nevertheless, the matching formula excludes the critical element of a state’s population in need—numbers of low-income people—and lacks an accurate measure of a state’s fiscal capacity.¹⁵

In practice, Medicaid redistributes tax revenues from lower- to higher-income states, which can afford to spend more of their own dollars and thus receive more federal dollars. For example, 31.5 percent of all health care spending in New York is financed through its Medicaid program, compared with a national average of 15.7 percent and 9.1 percent in the lowest state.¹⁶ In SCHIP, the federal government provided state allocations based on eligible populations, raised the federal match rate to 65–85 percent, and also included a “use it or lose it” provision that returned a state’s unused allocation to the program for use by other states.

A new Medicaid matching design could learn from Medicaid and SCHIP and include a per capita federal adjustment for the target expansion groups and other changes.¹⁷ Medicare coverage of prescription drugs could reduce Medicaid spending for the dually eligible (both Medicare and Medicaid) by up to $16 billion and could be a major part of a financing package for a new Medicaid program.¹⁸ Medicare coverage of people eligible for Social Security Disability Insurance (SSDI) without a two-year waiting period could save Medicaid programs $4 billion.¹⁹ An increase in the SSDI wage base (discussed later), which would provide an added $35 billion, could be partly allocated to coverage expansions for disabled populations, buy-ins, spend-downs, and reinsurance against catastrophic costs.

Covering working populations. The national challenge for covering the uninsured lies mostly in providing assistance to working populations. About 80 percent of the uninsured are in families in which one or more members are working.²⁰ Many attributes of the original Medicaid program—designed for impoverished, high-need, welfare populations—are not well suited for this task. The problems include the historical exclusion of many workers, complex eligibility rules, inequity of benefits that are more generous than most workers’ employer coverage, limited provider networks with low government payment rates, means-tested enrollment criteria and welfare-based enrollment processes, limited ability to buy into private health plans, and fully paid Medicaid costs for a population that could share in financing. New Medicaid legislation could offer an opportunity to reconsider these issues. Many states have worked through these issues in Medicaid, SCHIP, and their own self-funded programs. A number of states have created new programs that do not use the Medicaid name or have created larger health programs that include Medicaid: Washington’s Basic Health Plan, MassHealth, BadgerCare, and MinnesotaCare, to name but four.

Medicaid plus tax credits. One of the most promising strategies for covering the uninsured is “Medicaid plus tax credits.” A new Medicaid program, with national income-based eligibility standards, could be coordinated with many tax-credit proposals. For example, let’s consider one way a new Medicaid program could be melded with President George W. Bush’s proposed health insurance tax credits.

The administration’s tax-credit proposal offers credits of $1,000 per adult and $500 per child, up to $3,000 per family, for low-income people who are not now eligible for public programs (like Medicaid) or private employer-sponsored insurance.²¹ The full credit (up to 90 percent of an insurance premium) would be available for people with incomes below $15,000 (about 150 percent of poverty) and phased out by $30,000 (300 percent of poverty).²² For families with two adults earning up to $25,000 total, their full credits, $2,000, would be available, with a complete phaseout by $60,000. A two-adult, two-child family would receive the $3,000 maximum tax credit up to a $25,000 income level, with a complete phaseout by $60,000.

The philosophy of the Bush plan fits well with the income-based Medicaid concept outlined above. Both create a national entitlement to assistance, based on national income standards; drop the categorical approach of public welfare laws; and would be available to low-income workers who are not now covered by Medicaid. Although the federal tax credit is designed to purchase basic benefits only, it would allow for state supplements up to $2,000 per adult (for up to two adults per family) for incomes up to 133 percent of poverty. The maximum state contribution would phase down to $500 per adult at 200 percent of poverty (Exhibit 2).

Two modifications could align the new Medicaid plan and these tax-credit proposals. One change would allow state supplementation through Medicaid financing, or similar federally matched financing such as SCHIP. Since SCHIP raised federal matching to 65–85 percent for children, and the Trade Act of 2002 provided federal tax credits of 65 percent of premiums for covered laid-off workers, there are recent precedents for higher federal contributions than the one-third federal share implied by the Bush tax credit proposals. A second change would allow states options in how Medicaid could supplement the tax credits—not only by paying more premium dollars, but also by offering (or purchasing) selective benefits, reduced cost sharing, or income-related spend-down coverage, or some combination. There could also be consideration of allowing some employer or worker premium contributions to be eligible for federal matching support, to encourage financing from these sources and defray government costs. In this coordination model, there would be four levels of subsidies: tax credits plus new Medicaid (wrapping around the tax credits) for the lowest-income workers (up to 100 percent of poverty), full federal and state tax credits for a second tier (up to 133 percent of poverty), full federal and partial state tax credits up to 150 percent of poverty, and phased-out tax credits beyond that point.

An objective of some tax-credit advocates is that new federal credits be used for purchase of private health coverage. Many states will need to organize a better consumer-choice system than their existing individual coverage market and Medicaid-only health plans for use of the tax credits; in particular, to offer mainstream group-rated products without individual medical underwriting, so that tax-credit and Medicaid recipients can find affordable and desirable coverage. We thus suggest that states, in their new Medicaid programs, develop systems modeled after the Federal Employees Health Benefits Program (FEHBP), in which people who are eligible for Medicaid and tax credits could choose among group health insurance plans and Medicaid enrollment.²³ The Bush administration’s tax-credit proposal seems consistent with this general approach. The Treasury Department suggests that, at state option, the tax credit could be allowed to buy into “state sponsored purchasing groups (such as Medicaid or SCHIP purchasing pools for private insurance or state government employee programs for states in which Medicaid or SCHIP does not contract with private plans).”²⁴

A second coordination model for tax credits, Medicaid/SCHIP, and insurance market reforms could be for states to have an option to administer the health insurance tax credits through their income tax systems. This would allow states to offer “one-stop” shopping and integrated policy for expanding health insurance coverage. In practical terms, the federal government might advance funds to states to pay estimated health insurance tax credits, with periodic adjustments. Since there are several possible coordination models, it could be desirable to provide state options instead of insisting on a single national approach. For example, SCHIP gives states options on whether to develop new state health plans, use Medicaid, or develop joint options.

Enrollment systems. Whichever coordination model is used, workplace signup (with payroll withholding), “automatic enrollment,” and “transferable tax credits” are three very desirable features to assure coverage. With workplace signup, workers could make a choice of health plans at their worksite, assign their tax credit(s) to the chosen plan, and arrange for payroll withholding of their premium share. This could be a key advance for a new Medicaid model; requiring welfare office visits has been cited as a major disincentive to Medicaid and SCHIP enrollment. With automatic enrollment, individuals and families could be enrolled in insurance coverage, unless they specifically declined; this method has resulted in 95 percent Medicare Part B enrollment rates. With a transferable tax-credit feature, if an eligible person declined to use his or her tax credit to purchase private health insurance, the tax credit could be paid to the Medicaid program to finance a basic “safety net” benefit. Thus, all tax credit–eligible people would be covered, either through a private health plan of their choice or through a “default” Medicaid option. Administered with these three features, a “new Medicaid plus tax credits” strategy could achieve universal coverage for the target populations at modest cost compared to plans without such features that must pay very high subsidies to achieve high take-up rates.²⁵

Asset tests. The administration’s tax-credit proposal is based on income, without an asset test. This is consistent with general tax policy. As a relic of its welfare program origins, however, Medicaid still includes asset tests, but the levels are now optional for states. The asset test’s purpose—to assure that people impoverish themselves before receiving assistance—is fundamentally inconsistent with a sound public value of assuring that people have health insurance so that they can preserve their family’s lifetime savings when there are large medical bills. Some forty-four states have dropped asset tests altogether for SCHIP populations.²⁶ A new Medicaid program will need to drop the asset test to be acceptable to working populations and to be efficiently administered with tax credits.

Better Care For Disabled Americans

The second-largest challenge for a new Medicaid program, after extending health insurance coverage, is to improve the long-term care system for people with disabilities, among both the elderly and younger age groups. Medicaid expansions could assist a range of people, including people who are aging and have multiple chronic conditions, children born with a disability, and people who have a physically or mentally progressive illness or injury. A national long-term care strategy is beyond this paper’s scope; however, three priorities for a new Medicaid role could be as follows: (1) expanded eligibility to protect against catastrophic expenses and assist adults and children with disabilities; (2) coverage of alternatives to institutional care; and (3) more national financing for long-term care.

Medicaid is the primary program for U.S. nursing home and other institutional long-term care (intermediate care facilities and intermediate care facilities for the mentally retarded). Medicaid’s expansion into this role came about more by default—because there were populations with very large assistance needs and there was no other program for them—than as a result of a national plan. In 2001 nursing homes accounted for $47 billion of Medicaid’s spending—a 48 percent share of national spending. However, Medicare covered only 12 percent of nursing home care and private health insurance only 7.5 percent; nursing home patients paid $27 billion (35 percent) of national spending in out-of-pocket payments.²⁷ Since Medicare and private insurance leave so many gaps, many people with long-term, serious disabilities face financially disastrous expenses before they can qualify for Medicaid, and they must enter a nursing home to get the assistance they need. Most of Medicaid’s long-term care spending is for people who spend down to be eligible, after using up most of their own resources.

Expanded eligibility. Medicaid cannot now provide assistance to most people with long-term care needs until after they have been financially devastated. This can be remedied, as discussed earlier, by allowing people with disabilities to buy in to the Medicaid program so that they can qualify for needed health and long-term care benefits, and by expanding the use of income-related premiums, cost sharing, and spend-down protection. Many disabled people who might work do not do so, fearing loss of Medicare or Medicaid coverage. Under a new Medicaid program, the existing Medicaid buy-in options for working disabled people under SSI and ticket-to-work legislation could be strengthened, liberalized, and mandated. Medicaid’s expanded eligibility for long-term care benefits could offer a true “safety net” that is badly needed by most Americans.

Home and community-based benefits. A key improvement for a new Medicaid program could be to offer home and community-based services, including self- directed services, based on degree of disability, as a standard benefit.²⁸ The national Medicaid statute now severely limits states’ ability to offer such services; except in some circumstances, they can be provided only through a 1915(c) home and community-based care waiver. All states now have at least one such waiver, which demonstrates a need for such benefits and the growing experience in their administration. However, the waiver terms, which are imposed by the executive branch rather than through statute, cannot result in greater spending for a state’s Medicaid program; that is, there must be offsetting reductions to these benefit improvements. This budget-control policy might have been appropriate for the initial testing of a new benefit. However, home and community-based services waivers, enacted decades ago in 1981, have now proved their value.

Americans prefer home and community-based services so that they can continue to live in their own homes instead of moving into nursing homes. Consumer-directed care and personal aide services can be particularly important to develop for younger people with disabilities who want to work and live in the community. These individuals and families could have greater financial protection, self-direction, and choice about their services. The new Medicaid statutory coverage of home and community-based services for those who need them could accelerate the development of retirement communities, “nursing homes without walls,” and other residential arrangements for disabled people (Exhibit 3).

A national financing framework. Medicaid’s future role in long-term care should be part of a long-term care system that relieves huge state fiscal burdens on Medicaid and provides equitable financing. There are a number of options, including the structure now being considered for Medicare drug benefits: a basic Medicare entitlement and catastrophic coverage, an expanded Medicaid program, and private insurance opportunities.

New long-term care financing could be arranged by reforms of the enacted, but not yet implemented, elimination of the federal estate tax, which produced $28 billion of revenues in 2001 (and would produce $47 billion in 2013), and its dedication to a new federal-state long-term care arrangement.²⁹ An estate tax used in this way (“pay as you go”) is a form of premium for an insurance policy that provides asset protection against unlimited long-term care expenses. There is a broad tax base for progressive estate tax financing. This funding source could be dedicated to long-term disability coverage without net budget costs; that is, there would be added revenue (from unrepealing and modifying the estate tax) to offset the added expenses. An increase in the SSDI wage base, to match the health insurance wage base, would yield about $35 billion and could also be used for financing disability-related income and benefits for a more broadly defined population with disabilities.³⁰ A new federal matching formula may be needed for long-term care benefits, taking into account the numbers of senior citizens and disabled people in each state; in the interim, there may need to be a phased expansion, as there could be a large, unmet demand for these services.³¹

Accountability For Quality Of Care

The third major way in which a new Medicaid program could differ from today’s Medicaid program is that it could be managed as a health program as well as a financing program. It could measure health status and quality of care paid for by Medicaid funds, and it could be accountable for adopting policies and projects that improve quality of care and health status. Medicaid could be a national leader in reducing racial disparities in access and treatment, promoting prevention, improving care for patients with chronic disease, and many other quality-of-care issues. Suggestions for Medicaid quality initiatives include the following: (1) an expanded Health Plan Employer Data and Information Set (HEDIS) quality “report card” approach to all Medicaid services; (2) disease management demonstrations for the six million high-risk, dually eligible populations, who use 35 percent of Medicaid funds ($88 billion); and (3) public reporting and recognition, as well as financial incentives, for improved quality performance.³²

Medicaid Management

A new Medicaid program needs a new federal government home, new capabilities, and new federal-state relations. First, with more than five times the spending levels of most domestic cabinet departments, Medicaid is still only a small administrative component of the Centers for Medicare and Medicaid Services (CMS). A new Medicaid program, with expanded national missions, merits an equal administrative standing to the CMS, a comparably ranked administrator, and more staff resources. Second, a new Medicaid program needs an organized, systematic effort through which all the state Medicaid programs—and federal policymakers—can learn from experience and produce exciting and creative improvements in all phases of the Medicaid program. Finally, a new Medicaid program could benefit from a new federal-state forum for studies and discussions of Medicaid issues. Until its demise, the Advisory Council on Intergovernmental Relations fulfilled this function.

Medicaid is growing and changing without congressional involvement, through diverse state choices and executive-branch waivers. Huge gaps and inequities result from the outdated Medicaid statute, an absence of national standards, and unplanned spending growth. Our suggestion: a new federal-state partnership—a new Medicaid program. It is past time for Congress to delineate clear federal standards that raise minimum eligibility levels and to enact changes that will form the basis for universal health care coverage and effective long-term care programs.

Support for this paper was provided by the Robert Wood Johnson Foundation through a grant to the Health Insurance Reform Project (HIRP), George Washington University. The authors thank participants in a meeting on Medicaid’s future cohosted by HIRP and Health Affairs: Linda Bilheimer, Don Boyd, Bruce Bullen, Christy Ferguson, Sandy Foote, Bob Hurley, Mary Kennedy, Lee Partridge, Sara Rosenbaum, David Smith, Vern Smith, Jim Verdier, Bruce Vladeck, and Alan Weil. Our thanks also go to Randy Desonia and Jennifer Ryan. All are absolved from implied endorsement of the authors’ views.

NOTES

1. John Klemm, Office of the Actuary, Center for Medicare and Medicaid Services, personal communication, 1 July 2003. Estimates exclude SCHIP.
2. E. Ellis et al., Medicaid Enrollment in Fifty States: December 2001 Data Update (Washington: Kaiser Commission on Medicaid and the Uninsured, October 2002).
3. CMS, 2002 Medicaid Managed Care Enrollment Report (Baltimore: CMS, 2003).
4. K. Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs (Jan/Feb 2003): 154–164.
5. J. Holahan and M.B. Pohl, “States as Innovators in Low-Income Health Coverage,” Discussion Paper, Assessing the New Federalism Project (Washington: Urban Institute, June 2002).
6. For recent examples, see J. Meyer and E. Wicks, eds., Covering America, vols. 1 and 2 (Washington: Economic and Social Research Institute, 2002); V. Smith, Making Medicaid Better (Washington: National Governors Association, 2002); E. Fishman, Running in Place (New York: Century Foundation Press, 2002); and K. Davis and C. Schoen, “Creating Consensus on Coverage Choices,” 23 April 2003, www.healthaffairs.org/ WebExclusives/Davis_Web_Excl_042303.htm (21 July 2003).
7. A. Schneider et al., The Medicaid Resource Book (Menlo Park, Calif.: Henry J. Kaiser Family Foundation, 2002), 8.
8. A new Medicaid program should address coverage for immigrants. Immigrants used to be eligible for Medicaid, but federal law ended coverage in 1996 for new immigrants for their first five years of residency. In 2001, 2.5 million uninsured people were noncitizens living in poverty. R. Mills, Health Insurance 2001, Current Population Reports, P60-220 (Washington: U.S. Census Bureau, September 2002).
9. Families USA, Could Your State Do More to Expand Medicaid for Seniors and Adults with Disabilities? (Washington: Families USA, November 2001).
10. U.S. House of Representatives, Committee on Ways and Means, 2000 Green Book (Washington: U.S. Government Printing Office, 2000), 106–114, tables 3-9 and 3-10.
11. Medicare eligibility for people under age sixty-five with disabilities is limited to persons receiving Social Security Disability Insurance (SSDI) benefits; there is a two-year waiting period from the start of these benefits until a person is eligible for Medicare.
12. C. Mann et al., “Five Years Later: Poor Women’s Health Coverage after Welfare Reform,” Journal of the American Medical Women’s Association (Winter 2002): 16–22.
13. J. Gabel et al., “Job-Based Health Benefits in 2002,” Health Affairs (Sep/Oct 2002): 143–151.
14. The Trade Act of 2002 includes federal support for qualifying state high-risk pools.
15. U.S. General Accounting Office, Medicaid Formula, Pub. no. GAO-03-620 (Washington: GAO, July 2003).
16. A. Martin et al., “Health Care Spending during 1991–1998: A Fifty-State Review,” Health Affairs (July/Aug 2002): 112–125.
17. For example, the federal contribution could include a per capita federal payment for Medicaid-eligible populations (adjusted for medical care costs in each state), plus a federal matching rate for state expenditures that depends on state spending and fiscal capacity.
18. S. Dale and J. Verdier, State Medicaid Prescription Drug Expenditures for Medicare-Medicaid Dual Beneficiaries (New York: Commonwealth Fund, April 2003). An estimated $7 billion would be the state share of the savings. Savings would depend on the design of an initial Medicare drug benefit and its improvement.
19. S. Dale and J. Verdier, Elimination of Medicare Waiting Period for Seriously Disabled Adults (New York: Commonwealth Fund, July 2003).
20. “The Uninsured and Their Access to Health Care” (Fact Sheet) (Menlo Park, Calif.: Kaiser Family Foundation, January 2003).
21. U.S. Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2004 Revenue Proposals (Blue Book) (Washington: Treasury Department, 2003), 45–48.
22. Census 2002 poverty guidelines, projected by the authors to 2004.
23. See S. Dorn and J. Meyer, Nine Billion Dollars a Year to Cover the Uninsured: Possible Common Ground for Significant, Incremental Progress (Washington: ESRI, 2002); and L. Etheredge and S. Dorn, Health Insurance for Laid-Off Workers: A Time for Action (Washington: ESRI, 2003).
24. Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2004 Revenue Proposals.
25. L. Etheredge, Tax Credits for Uninsured Workers (Washington: Health Insurance Reform Project, George Washington University, September 1999). The document that workers sign to decline automatic enrollment/payroll deductions would serve to transfer unused tax credits to Medicaid programs on their behalf.
26. D. Rowland and A. Schneider, “Medicaid 101: The Basics of America’s Biggest Health Program” (Slide presentation), 28 February 2003, www.kaisernetwork.org (14 August 2003).
27. Levit et al., “Trends in U.S. Health Care Spending, 2001.”
28. L. Foster et al., “Improving the Quality of Medicaid Personal Assistance through Consumer Direction,” 17 April 2003, www.healthaffairs.org/WebExclusives/Foster_Web_Excl_041703.htm (21 July 2003). For international experience, see A.E. Cuellar and J.M. Wiener, “Can Social Insurance for Long-Term Care Work? The Experience of Germany,” Health Affairs (May/June 2000): 8–25.
29. The effective exemption for the estate/gift tax rises from $675,000 in 2001 to $3.5 million in 2009, and the estate tax is repealed for 2010. A. Davis, “Summary of Major New Law Changes in Estate/Gift Taxes,” Briefing Memorandum (Washington: House Committee on Ways and Means, 2001).
30. The SSDI contribution rate, 1.8 percent, is applied to the Social Security wage base, about $4.2 trillion in 2002; the health insurance (HI) wage base is about $6 trillion.
31. For people qualifying for SSDI, two Medicare changes would be particularly useful: coverage of outpatient prescription drugs, and elimination of the two-year waiting period after disability benefits begin to start Medicare eligibility. An increase in the SSDI wage base could be part of this package.
32. Examples of a “report card” approach include the Child and Adolescent Health Measurement Initiative (CAHMI) of the Foundation for Accountability and the Performance Measurement Partnership Project at the National Academy for State Health Policy. Regarding Medicaid funding percentages, see Rowland and Schneider, “Medicaid 101.”

Lynn Etheredge (lyneth{at}aol.com) is a consultant with the Health Insurance Reform Project at the George Washington University in Washington, D.C. Judith Moore is codirector of the National Health Policy Forum, also based at the George Washington University.

Read related papers by Uwe E. Reinhardt, Jonathan Oberlander, Robert J. Blendon, John M. Benson, and Catherine M. DesRoches, and Jack A. Meyer and Sharon Silow-Carroll.

10.377/hlthaff.W3.426
©2003 Project HOPE–The People-to-People Health Foundation, Inc.