January 26, 2022
The Build Back Better (BBB) Act would improve health and save lives by expanding access to affordable health care. Non-elderly adults caught in the “Medicaid coverage gap”—those too poor to qualify for subsidized private insurance in the Affordable Care Act (ACA) marketplace exchanges yet not eligible for Medicaid—would be able to obtain affordable medical care if the Act is passed. This article provides information on what the Medicaid gap issue is, how the BBB Act addresses the issue, and whom this bill aims to help.
What is the Issue?
The ACA originally required all states to expand their Medicaid programs to cover all non-elderly adults with income below 138 percent of the Federal Poverty Level (FPL) and provided federal funding that covered nearly all (currently 90 percent) of the costs. Under the law, the US Department of Health and Human Services could enforce the expansion requirement by cutting the federal funding states had long received to provide Medicaid coverage to other groups, including the elderly, disabled, and very low-income parents. But in 2012, the Supreme Court decided that conditioning federal Medicaid funding for already covered groups in states expanding Medicaid to new groups was unconstitutional. As a result, Medicaid expansion became optional, and the federal government cannot force states to take federal funding to cover non-elderly low-income adults.
The ACA also established a new Health Insurance Marketplace® or exchange to make it easier for people to find health insurance and a new premium tax credit that reduces the cost of insurance for people with incomes between 100 percent and 400 percent of the FPL. Congress made people with incomes below 100 percent of poverty ineligible for the premium tax credit because they assumed this group would be fully covered by Medicaid. The Supreme Court’s ruling created a gap in coverage in states that have not expanded Medicaid. Non-elderly adults with incomes below the FPL aren’t eligible for Medicaid in non-expansion states—unless they have extremely low incomes and are caring for a minor child or are disabled and receiving Supplemental Security Income (SSI)—and they aren’t eligible for the premium tax credit. Currently, 12 states have yet to expand Medicaid, although one of these states (Wisconsin) covers most non-elderly adults with income below the poverty line under a pre-ACA Medicaid waiver.
Poverty, Health Care, and Death
Research has shown that income and mortality are closely linked, and for certain groups of low-income people, many studies have shown that Medicaid can save lives. One study found that between 2014 and 2017, Medicaid expansion saved almost 20,000 lives, while non-expansion states cost almost 16,000 lives. A University of Southern California study showed that expansion states have a lower mortality rate for all causes of death and specifically fewer cardiovascular and respiratory-related deaths. This is especially important now because COVID-19 can have severe complications for people with preexisting respiratory and cardiovascular diseases. COVID-19 can also create these problems. It is not rocket science: people with guaranteed affordable health care are more likely to get preventive treatment and affordable medications that can keep them alive, and there is data to prove it.
Non-Expansion States Need to Improve Their Medical Care the Most
In its 2021 America’s Health Rankings survey, United Health Foundation found that when it comes to clinical care, which measures preventive services, all five out of the five least healthy states are non-expansion states, if you include states that just expanded in 2021 (Oklahoma). On the measure of overall health outcomes, six out of the 10 least healthy states are non-expansion states, including states that just expanded in 2021 (Oklahoma and Missouri). This survey shows that the states that rank lowest on these measures are the states that should most actively pursue better care for their citizens. People in the Medicaid gap are sometimes forced to rely on religious organizations, limit or forgo preventive care altogether, or even resort to setting up GoFundMe pages to raise money for serious operations like an organ transplant.
Who is in the Medicaid Gap?
People in the Medicaid gap are uninsured low-income adults between the ages of 19–64 who live in one of the 12 states that did not expand Medicaid. In these states, non-elderly adults are generally ineligible for Medicaid unless: 1) they are disabled and receiving SSI; or 2) are caring for a minor child and have extremely low incomes. For non-elderly adults caring for minor children and other caregivers, there is an income maximum seen in Table 1 below. For example, 100 percent of the FPL for a family of three is $21,960. In Alabama, where the threshold is 13 percent of the FPL, a caregiver for a family of three with an annual income greater than $2,854.80 will not be able to get Medicaid.
| State Medicaid Income Eligibility Standards in Non-Expansion States as of July 2021, as Percentage of the FPL | |
|---|---|
| State | Adults-Parent/Caretaker |
| Alabama | 13% |
| Florida | 27% |
| Georgia | 31% |
| Kansas | 33% |
| Mississippi | 21% |
| North Carolina | 40% |
| South Carolina | 95% |
| South Dakota | 52% |
| Tennessee | 95% |
| Texas | 14% |
| Wisconsin | 95% |
| Wyoming | 51% |
Source: Medicaid, Children’s Health Insurance Program, & Basic Health Program Eligibility Levels
According to Kaiser Family Foundation (KFF), if all 12 non-expansion states expanded their Medicaid programs, nearly four million uninsured adults would become eligible for coverage.
What About the Marketplace?
In order to get marketplace subsidies currently, enrollees have to make at least 100 percent of the FPL to be able to receive a tax credit. Those that make below 100 percent of the FPL and meet certain narrow restrictions could get the subsidy, otherwise, they do not qualify for the credit. Without employer-sponsored health insurance, this means that a caregiver in a non-Medicaid expansion state who earns below 100 percent of FPL but above the state Medicaid maximum income threshold must pay for health insurance coverage without subsidies or go without health insurance.
How Does the BBB Act Address This Issue?
Under the BBB Act, people in the coverage gap in non-expansion states would be able to obtain free or nearly free coverage through the ACA marketplace in 2022 through 2025. The federal government would fully cover the premium costs of a benchmark plan and provide additional subsidies that would limit potential out-of-pocket costs to roughly 1 percent of covered expenses.
Extending near-free marketplace coverage to low-income adults in the coverage gap in non-expansion states is a vast improvement on the status quo. At the same, it is generally a second-best solution to allowing them to enroll in Medicaid because Medicaid generally has more beneficiary protections and imposes fewer administrative burdens than marketplace coverage. One study showed that Medicaid coverage is less costly than the marketplace for individuals when looking at annual spending and out-of-pocket costs including prescription costs. So, while this provision is an important advance, efforts should continue to expand Medicaid in non-expansion states.
Who Does This Help?
These BBB provisions can help low-income non-elderly adults in the states that did not expand Medicaid. In Georgia, nearly 60 percent of those who would gain access to affordable health care are people of color, and 35 percent are aged 35–54. In Wyoming, 70 percent of them are white, and 40 percent are aged 25–34. In all non-expansion states, over 70 percent of families have at least one worker in the household.
The top 10 states with the highest poverty rates for people aged 19–64 are shown in Figure 1 below. Unsurprisingly, we find that the expansion states have much higher rates of Medicaid coverage for those living below the FPL.
Figure 1
Rural Communities Will Benefit
The rural population in America is mostly white and suffers from a relatively high rate of poverty. In a 2016 study, KFF found that one-in-four non-elderly individuals in rural areas are covered by Medicaid, and coverage rates tend to be higher in rural areas than in urban or other areas of states. According to a recent review by the Center for Medicare and Medicaid, rural residents in Medicaid expansion states are more likely to be insured than those in non-expansion states.
This means that rural hospitals in non-expansion states are more likely to have uncompensated care either due to individuals not having any health insurance coverage or to the lack of federal funding for Medicaid that non-expansion states forwent. Ultimately, this has led to higher rates of rural hospitals closing than those in non-expansion states. The CEO of Texas Organization of Rural and Community Hospitals (TORCH), an organization dedicated to supporting rural and community hospitals in Texas, found that “70 percent of rural hospital closures are in states that haven’t expanded.” If the people in the coverage gap opt into marketplace coverage as the BBB will allow, this can help both the rural poor and rural hospitals.
Low-Income People with Disabilities Will Have Increased Access to Affordable Health Care
Disabled individuals receiving SSI are eligible for Medicaid. However, a study done by KFF found that 60 percent of disabled people are not eligible for SSI because of the narrow restrictions to qualify. As of 2019, 53 percent of disabled non-elderly adults in non-expansion states did not qualify for SSI. Adding to the fact that less than 20 percent of people with disabilities are part of the labor force, disabled non-elderly adults in non-expansion states have limited access to employer-sponsored insurance and face the narrow restrictions of Medicaid eligibility. The BBB Act will give them the option of affordable insurance through the marketplace which guarantees health insurance companies cannot refuse care because of preexisting conditions.
BBB Act Positively Impacts Low-income People of All Races
Black people are overrepresented in the poverty populations in the non-expansion states, as seen in Table 2, below. In Georgia, the Black population makes up one-third of the total population, but almost half of those in poverty are Black.
Expanding coverage in these states has multiple benefits. An important one is that the marketplace plans cover children up to the age of 26, whereas Medicaid covers only up to age 19. The rates of uninsured people substantially increases in the teenage years, which has serious effects like higher rates of mental health issues and incarceration, especially for young Black men.
| State | Black population as a share of total poverty in the state | Black population as a share of total population |
|---|---|---|
| Alabama | 39.1% | 28.1% |
| Florida | 23.7% | 16.8% |
| Georgia | 44.1% | 33.8% |
| Kansas | 10.7% | 5.9% |
| Mississippi | 57.8% | 39.1% |
| North Carolina | 33.4% | 22.5% |
| South Carolina | 43.1% | 28.2% |
| South Dakota | 1.3% | 2.6% |
| Tennessee | 25.0% | 17.6% |
| Texas | 17.8% | 13.4% |
| Wisconsin | 14.7% | 6.3% |
| Wyoming | 3.7% | 1.2% |
Source: Author’s analysis of 2019 American Community Survey data from IPUMS USA, University of Minnesota, www.ipums.org; the Black population refers to non-Hispanic only. Institutional population is excluded.
The Latino population is also vulnerable. A study from the Georgetown University Health Policy Institute found that “while Latinos are more likely to participate in the workforce than non-Latinos, they are less likely to have employer-sponsored insurance.” The research also points out that covering parents and caretakers also expands coverage rates for children. This is important for states like Texas, where there is a large native-born Latino population that falls below the poverty level, seen in Figure 2 below.
Figure 2 shows that the white population makes up the largest share of low-income people in all but two non-expansion states (Georgia and Mississippi). Whites also make up the largest share of the coverage gap: almost 900,000 out of the over two million low-income people the BBB Act will help.
Figure 2
The BBB Act is a Good Step Forward.
As we move into a new phase of the COVID-19 pandemic with the omicron variant, it is even more urgent to expand access to affordable health care. If we were to administer Medicaid on the federal level, or if the 12 remaining states expanded Medicaid, our country could come more in line with the many other countries that provide universal coverage. But in the meantime, the BBB Act would increase access to affordable health care through the marketplace and help the neediest survive in the most critical of times.
