Infringed Benefits … Myths, Truths and Consequences of Health Care Reform for the Poor and Disabled

By Sarah SullivanAssistant Professor of Professional Skills
Illustrations by Tony Rodrigues, Tact Designs

When discussing the sweeping federal health care reform of today, we can’t help but hear the political pundits’ constitutional perspective, the political perspective, and even the corporate “health care as a business” perspective. Coverage of the health care reform debate is on every television news network, Internet blog, and print medium in the galaxy. Set within the context of our current recession, most individuals are worried about their own bottom line and less concerned with contributing to the common good.

In such a financially perilous time, Congress has enacted the most comprehensive overhaul of health care delivery our nation has witnessed since Congress established Medicare and Medicaid in 1965.1

Ironically, for those of us insured with private employer-sponsored health care coverage, how we access our health care will not change dramatically.2 However, for those uninsured, under insured and those enrolled in Medicaid and Medicare, the Patient Responsibility and Affordable Care Act of 2010 expands insurance coverage while tackling the intrepid goals of increasing coverage while driving down the exponential growth of health care costs in the United States – two goals that are traditionally thought to be disparate.

Within the morass of individual concern about the costs (both in dollars and in liberty) and amid the 1,000-plus pages of the mammoth legislation lies the health care grail for the poor and disabled. So, why is the Affordable Care Act so good for the poor and disabled? An initial understanding of how the current Medicaid and Medicare systems operate is important to answering this question.

Medicaid

Medicaid was established in 1965 within the Social Security Act with the goal of standardizing different state health care programs for the poor and disabled. 3

It is a joint state-federal health insurance program. You can only receive Medicaid if you are financially eligible.4 The federal government sets guidelines for state Medicaid programs (called state plans) and provides a portion of funding for the programs.5 Each state promulgates its own rules on how to administer the program and also pay a portion of funding. States may also choose to expand coverage to other non-mandatory individuals and may also make financial eligibility requirements more generous.6

Medicaid eligibility is determined by an individual’s income and assets.7 Almost 62 million individuals currently receive Medicaid in this country through their state programs.8 Of those, almost half these recipients are children, who comprise the largest pool of Medicaid recipients. The other recipients are adult caretakers of children, adult disabled individuals and low-income elderly adults.9

As Medicaid roles rise, so does the federal government’s financial contribution to state Medicaid programs. Each state has a different ratio of federal-to-state spending, but the federal portion of Medicaid subsidy is anywhere from 50-75 percent of each state’s Medicaid budget.10

Medicare

In contrast, Medicare is a federal health insurance program for individuals age 65 or older and individuals with disabilities receiving Social Security disability income. Medicare’s original purpose was to provide older Americans with health care services.

Disabled individuals were not added to the program until 1972 and, to-date, disabled individuals have to wait two years after their Social Security disability determination to begin receiving Medicare coverage.11 The only two exceptions are for end-stage renal disease and amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease. The end-stage renal disease exception was created in 1972 at the same time disabled individuals became entitled to Medicare.12 The ALS exception was created by Congress in 2000.13 All other disabled individuals must wait the 24-month period for Medicare coverage and, unfortunately, four percent die waiting for Medicare coverage.14

Medicare includes hospital insurance (Part A), doctors visits (Part B), supplemental insurance (Part C) and prescription drug coverage (Part D). Part A is mandatory, and all individuals enroll in Part A without having to pay monthly premiums. Part B is optional and requires payment of a monthly premium. If an individual is on traditional Medicare and receiving Social Security benefits, the $99.90 premium is deducted from the beneficiary’s check before being mailed.15 If a person chooses not to enroll in Part B, a 10 percent penalty is imposed for each 12-month period an individual fails to enroll for Part B, if the individual chooses later to enroll.16

Supplemental insurance (also known as Part C) is not required but may cover some of the everyday health care expenses not covered by Part B, such as vision and dental care. These Part C benefits can be Medigap insurance policies (through the federal government) or Medicare Advantage Plans (privatized managed care of Parts A-D). Supplemental insurance benefits vary widely, and as benefits increase, so do the monthly premiums.

Part D was created during President George W. Bush’s tenure and signaled the largest expansion of Medicare since the creation of the program by President Lyndon B. Johnson in 1965.17 Prescription drug coverage is offered either as individual policies or as benefits of Medicare advantage plans (privatized Medicare).18 Additional premiums apply, and the program is privatized, meaning that it is administered through private health insurance companies rather than the federal government.19

The Uninsured

Although all individuals, regardless of income, receive Medicare at age 65, and although Medicaid is available to qualified indigent persons, a huge swath exists of Americans who are either under insured or uninsured.20

The Affordable Care Act’s main goals include reining in health care expenditures generated by under insured and uninsured Americans while expanding health care insurance coverage and access to them.21 Changes to Medicaid and Medicare will provide better coverage to more individuals beyond the current scope of coverage as well as reducing some consumer expenses such as the Part D coverage gap, known as the “donut hole,” and demanding more efficiency for health care delivery.

There are thousands of uninsured individuals suffering from pre-existing or disabling conditions that aren’t covered by Medicaid and Medicare.22

Individuals can wait as long as 36 months for a disability determination from the Social Security Administration without any health insurance coverage,23 and once approved, wait an additional two years if they will receive Medicare as stated above.24

Under the Affordable Care Act, insurance companies will no longer be able to deny coverage based on a pre-existing condition.25 Therefore, individuals previously “uninsurable” will have options in the private market through health care exchanges, or through Medicaid.26 Each state has already implemented a temporary “high-risk pool” insurance option for chronically ill individuals if they have been uninsured for over six months.27 Non-disabled adults without children were ineligible for Medicaid, even if they were financially eligible prior to the passage of the Affordable Care Act.28

As of 2014, anyone with income within 133 percent of the federal poverty level may apply and receive Medicaid, regardless of family status or disability.29 Increasing the financial eligibility standards and allowing “healthy” individuals access to Medicaid health coverage will expand coverage to previously uninsured individuals and will ultimately curb health care costs by providing preventative care and avoiding costly uncovered health care services to chronically ill, uninsured individuals.30

States with ever-shrinking budgets but ever-expanding Medicaid costs balk at the prospect of more individuals receiving eligibility under the Affordable Care Act.31

Anticipating reticence from state governments, the Affordable Care Act increases the ratio of federal dollars paid to state governments to pay for 100 percent of the Medicaid expansion for 10 years.32

The Affordable Care Act puts restrictions on the growth of payments to medical providers and hospitals with the goal of slowing growth of Medicare costs.33 The tighter rein on health care providers results in slower increases in Part B premiums as well as lower copayments and coinsurance for individual beneficiaries.34 By eliminating the Part D “donut hole,” the Affordable Care Act will save beneficiaries thousands of dollars in out-of-pocket expenses.35 This “phase-out” is expected to save Part D beneficiaries from $631.00 in 2011 to almost $2,400.00 in 2026.36

Medicaid Waivers

State governments have focused on reforming Medicaid recently to address increasing growth in Medicaid costs. Privatization through health maintenance organizations, establishment of medical homes and fraud/abuse reduction measures serve as innovative vehicles to achieve program cost containment.

Each state has a Medicaid state plan that conforms to federal requirements under Section 1905(a) of the Social Security Act. If a state wishes to amend its state plan, it must complete the state plan amendment process through the Centers for Medicare and Medicaid Services (CMS).37 State Plan Amendments are required when federal law creates new Medicaid requirements such as the Deficit and Reduction Act of 2005.

If states wish to offer Medicaid coverage outside of the federal guidelines, they must get permission from the federal government in the form of a waiver. There are several types of waivers, but those that affect Medicaid redesign are generally covered under Section 1115 of the Social Security Act. Called research and demonstration waivers, 1115 waivers can be requested by states that wish to offer an innovative, experimental program.38

The waivers must be budget neutral (meaning that it cannot cost the federal government more than the regular state plan Medicaid). These waivers have a specific timeline, reporting requirements and a research component with goals of curbing costs, expanding coverage to otherwise ineligible beneficiaries or providing tailored Medicaid benefits to a specific population. It gives states the opportunity to try new programs within a definite time period without a long-term state plan commitment.39 Additionally, when the federal government is only required to provide as little as 50 percent in matching funds toward each Medicaid state plan, federal contributions to a 1115 waiver can reach 80 percent of the total cost of the waiver, making it an attractive cost-saving incentive for state Medicaid budgets.40

State Reform Efforts 

Back in 2005, Florida launched the Medicaid Reform Research and Demonstration Waiver, a pilot program based on Medicaid privatization and consumer choice.41

The original pilot covered four counties. In 2011, Governor Rick Scott signed legislation that would expand Medicaid reform across the state. The program eliminates the traditional fee-for-service Medicaid payment model and, instead, pays private health insurance companies a per-beneficiary fee for managing care called “capitation.” In reform, managed care plans that provide for services on a prepaid, capitated basis agree to accept the capitation payment and assume financial risk for delivering all covered services. A major concern of this approach is that chronically ill Medicaid beneficiaries will be refused necessary services if their medical expenses exceed the capitated rates.42

California cut Medicaid spending by reducing services for in-home supports and increasing beneficiary copayments and premiums in 2010.43 Additional cuts included caps on services as well as reductions to provider rates.44

Innovations to Medicaid delivery include amendment of California’s 1115 Comprehensive Demonstration Waiver as a “bridge to reform,” whereby the state implements federal health care reform measures early with an added benefit of increased federal dollars.45 California’s “bridge to reform” enables federal money to flow to the state to create a smoother transition in 2014 when the Medicaid expansion takes place.46

Improving quality, improving health and reducing Medicaid costs are the three main goals of New York’s Medicaid reform initiatives.47 New York’s 1115 waiver application, which implements a global Medicaid spending cap, was recently approved by the federal government. This cap differs from individual capitated plans. This “cap” refers to the state Medicaid budget. If costs exceed the cap, the Secretary of Health has the discretion to adjust provider reimbursement and incorporate other cost-saving measures to radically reduce spending.48 This “cap” creates an incentive for providers and health management entities to efficiently manage care to meet the Medicaid budget to avoid reimbursement reductions.

In the shadow of Affordable Care Act implementation, many state leaders propose Medicaid block grants to take the regulation of federal Medicaid powers away from the federal government and shift them primarily to states.

Despite radical differences in ideologies, most health care reforms focus on better coordination of care, reduction of health care fraud and controlling the rising costs of health care. The Affordable Care Act creates tools to meet those goals while also providing for expansion of coverage to under- or uninsured individuals through reforms of the Medicaid and Medicare programs. Because many of the initiatives of the Affordable Care Act are in various stages of implementation, the overturn of the landmark legislation will create logistical issues forcing Congress to readdress federal health care reform legislation.

Without the implementation of the Affordable Care Act, the state and federal governments will have to continue partnering to solve the health care crisis affecting so many poor Americans. Entitlement reforms are inevitable as our government stretches to meet the ever-increasing health care needs of the most vulnerable.


1 42 USC §§1395, 1396 (1965).

2 45 CFR 147.140 (2011).

3 42 U.S.C. §1396-1 (1965).

4 Id.

5 42 U.S.C. §1396a (2012).

6 States may participate in “optional” programs to individuals designated in 42 U.S.C. 1396d(a).

7 42 U.S.C. §1396a(a)(10)(i)(2011).

8 Total Medicaid Enrollment, FY 2009, http://www.statehealthfacts.org/comparemaptable.jsp?ind=198&cat=4 (last update April 19, 2012).

9 Id.

10 76 FR 74061 (November 30, 2011).

11 42 U.S.C. 426 (2012).

12 Id.

13 Id.

14 Bob Williams, Adrianne Dulio, Henry Claypool, Michael J. Perry and Barbara S. Cooper, “Waiting for Medicare: Experiences of Uninsured People with Disabilities in the Two-year Waiting Period for Medicare,” The Commonwealth Fund and Christopher Reeve Paralysis Foundation (October 2004).

15 76 Fed. Reg. 67,572 (November 1, 2011). Individuals earning more than $85,000.00 pay a larger premium.

16 73 Fed. Reg. 36,463 (June 27, 2008).

17 Supra n. 1.

18 42 U.S.C. 1395w (2012)

19 Department of Health and Human Services Center for Medicaid and Medicare Services, “Medicare Advantage Plans (Part C),” http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-c.aspx (accessed June 11, 2012).

20 The Kaiser Commission on the Uninsured, “The Uninsured, a Primer. Key Facts About Individuals With out Health Insurance,” http://www.kff.org/uninsured/upload/7451-07.pdf (October 2011).

21 U.S. Department of Health and Rehabilitative Services, “Reducing Costs, Protecting Consumers: The Affordable Care Act on the One Year Anniversary of the Patient’s Bill of Rights, http://www.healthcare.gov/law/resources/reports/patients-bill-of-rights09232011a.html (September 23, 2011).

22 Emily Carrier, Tracy Yee, and Rachel L. Garfield, “The Uninsured and Their Health Care Needs: How Have They Changed Since the Recession?” Kaiser Commission on Medicaid and the Uninsured (October 2011).

23 United States House of Representatives, Serial No. 111-38 (HOUSE Hearing) – “Clearing the Disability Claims Backlogs: The Social Security Administration’s Progress and New Challenges Arising From the Recession.” (November 19, 2009).

24 Supra n. 11. Ironically, individuals that haven’t “paid into the system” receiving SSI receive Medicaid automatically upon a successful disability determination.

25 42 U.S.C. 18001 (2010).

26 Supra n. 20.

27 45 CFR 152.2 (2011).

28 Kaiser Commission on Medicaid and the Uninsured, “Where Are States Today? Medicaid and CHIP Eligibility Levels for Children and Non-Disabled Adults” (March 2012).

29 77 Fed. Reg. 17,144 (March 23, 2012 ).

30 42 CFR Parts 431, 433, 435, and 457 (2012).

31 27 States filed suits in Federal Court regarding the Medicaid expansion based on a states’ rights argument.

32 76 Fed. Reg. 51,148 (August 17, 2011).

33 76 Fed. Reg. 73,026 (November 28, 2011).

34 United States Department of Health and Human Services, Office of Assistant Secretary for Planning and Evaluation, “Medicare Beneficiary Savings and the Affordable Care Act” (February 2, 2012).

35 Id.

36 Id.

37 Department of Health & Human Services, Centers for Medicare & Medicaid Services, Letter to State Medicaid Directors and State Health Officials. SMD #10-020, http://hsd.aphsa.org/SMD_letters/pdf/ SMD/MedicaidSPAReviewProcess10-01-10.pdf (October 1, 2010).

38 Charles Milligan, “Section 1115 Waivers and Budget Neutrality: Using Medicaid Funds,” The Robert Wood Johnson Foundation (May 2001).

39 Id.

40 Id.

41 Florida Statutes, § 409.91211 (2012).

42 Id.

43 California Budget Project, “Recent Cuts to Medicaid Services Have Impaired Access to Services,” http://www.cbp.org/pdfs/2011/110610_Medi-Cal_Cuts.pdf (June 10, 2011).

44 Medicaid rates are already the lowest rates paid to providers.

45 Kaiser Commission on Medicaid and the Uninsured, “California’s ‘Bridge to Reform’ Medicaid Demonstration Waiver” (October 2011 update).

46 Id.

47 New York State Department of Health, “A Plan to Transform the Empire State’s Medicaid Program” http://www.health.ny.gov/health_care/medicaid/redesign/docs/mrtfinalreport.pdf (accessed June 11, 2012).

48 Id.

,