How to close the health insurance coverage gap

• Uninsured individuals fall in the health insurance coverage gap if their income is too low to qualify for a subsidy on the federal exchange.
• Medicaid expansion proponents want to give these individuals a “hand out” of taxpayer funded health insurance.
• Cultivating economic opportunity is a far better way to give a “hand up” to the uninsured so they can exit the coverage gap.

The healthcare lobby is hard at work this legislative session. When they’re not busy bullying the State Treasurer, they are advocating for expansion of the state’s Medicaid program.

The most recent rhetoric for expansion has centered around the state’s health insurance “coverage gap.” What is the coverage gap, and does it necessitate the expansion of Medicaid in North Carolina?

Creation of the Coverage Gap

Over 2 million low-income children, parents, elderly folks, and individuals with disabilities currently have health insurance through Medicaid in North Carolina.

Authorized under the Affordable Care Act (ACA), Medicaid expansion would add over half a million North Carolinians to the government health insurance program. In the ACA plan, anyone under 100 percent of the federal poverty level would be covered by state Medicaid programs while individuals from 100 percent to 400 percent would receive a subsidy to purchase health insurance on the federal exchange.

However, once the U.S. Supreme Court ruled that expansion was a state decision, a “coverage gap” came into existence in states that did not expand their Medicaid programs. The coverage gap includes those who are not eligible under a Medicaid-covered category but are too low-income (below 100 percent of the poverty level) to qualify for a federal subsidy.

Eligibility for Medicaid in North Carolina is related to both income and category. Low-income status alone is not enough to qualify; you must also fall into one of the covered categories, such as children or individuals with disabilities. That’s because Medicaid was never intended to be a solution to poverty – it was intended to help the most vulnerable among us. The best poverty solution for everyone else? A good job. Expanding Medicaid fundamentally changes the program from a helping hand for the disadvantaged to a welfare program for able-bodied adults.

What Expansion Supporters Won’t Tell You

Proponents of expansion have leveraged the coverage gap to help persuade lawmakers to expand Medicaid. One group, the North Carolina Healthcare Association, recently published an infographic illustrating the coverage gap by comparing someone who would be eligible for a subsidy (“John”) with someone who wouldn’t (“Jan”).

 

There are two key words on the infographic – “part time” – that reveal that truth of Medicaid expansion. The graphic had to specify that Jan is a part-time worker because a single person working full time at minimum wage would qualify for a subsidy on the exchange. In fact, someone only needs to work 35 hours at minimum wage to meet the threshold.

Of those who would be newly eligible for Medicaid under expansion, 78 percent would be working-age, able-bodied, childless adults.

Some back of the envelope calculations shed light on the implications of this demographic reality. Most estimations predict around 500,000 North Carolinians would be newly eligible for Medicaid under expansion. Of those, 78 percent would have no dependents – an estimated 390,000. If 390,000 individuals do not qualify for a subsidy, that means they make less than 100 percent of the federal poverty line, meaning they work less than 35 hours per week at minimum wage. With no dependents and no disability that would prevent them from working, why do these individuals not have full-time employment?

Undoubtedly, many of them do. The Kaiser Family Foundation estimates that around 297,000 uninsured North Carolinians currently qualify for FREE health insurance on the federal exchange. According to the report, that’s around 36 percent of the state’s uninsured population.

Other uninsured individuals may not have full-time employment because they are in school. However, there are plenty of non-Medicaid options for those individuals. Individuals under 26 years old can stay on their parents’ health insurance and many schools offer a health insurance option to their students. Regardless, though, should pursuing higher education entitle someone to be supported by taxpayers? Such thinking is along the same lines as the “free community college” proposals – which disproportionately benefit students from upper and middle-class families.

So, how DO we close the coverage gap?

The demographic analysis of the individuals in the coverage gap is revealing. The health insurance coverage gap is not the problem – it is a symptom. Some low-income individuals that would be newly eligible for Medicaid under expansion are currently not meeting their full economic potential. I do not say that to disparage those individuals, but just to emphasize that the most compassionate thing that we can do for them is to help them become more self-sufficient.

The best-case scenario for most uninsured individuals is to get a job that provides health insurance as a benefit or to make enough income to qualify for a subsidy on the exchange. The state can help them get there – and we are on the right track. Fueled by the national economic uptick and the jobs-friendly tax and regulatory policies implemented in 2013, North Carolina’s unemployment rate has dramatically decreased since the Great Recession. In fact, North Carolina has been rated as the top state to do business by Forbes magazine for the past two years.

There is still work to be done to bring economic independence to all North Carolinians – and help more people obtain health insurance as a consequence.

First, the state can continue on its job-cultivating path by eliminating the corporate income tax. This would help attract more businesses to the state, creating jobs and growing our economy.

Next, North Carolina can adopt policies that respect the value of work. The state can encourage entrepreneurship by continuing to improve occupational licensing or other regulatory reforms. Moreover, North Caroline could also adopt policies that respect employment opportunities across a diversity of skills. For example, support for community colleges and apprenticeship programs can help fill the state’s middle-skills gap. Technical, middle-skill careers that are good-paying and essential to our economy. According to the National Skills Coalition, middle-skill jobs are those that require more than a high school diploma but less than a 4-year degree. In 2015, 55 percent of North Carolina’s jobs were middle-skill level, but only 44 percent of the state’s labor force have that level of training.

Lastly, North Carolina can adopt healthcare reforms that remove government intervention and allow free market forces to not only address the root causes of our healthcare problems but also increase supply and drive down prices for everyone. For example, the NC Senate recently passed legislation authorizing Association Health Plans, which allow small business employees and the self-employed (such as farmers) to combine their buying power on the healthcare market to drive down prices. This will almost certainly help some of the working uninsured – who may make too much to qualify for Medicaid under expansion anyway – find affordable health insurance options outside of the exchange.

These policies can help uninsured North Carolinians find health insurance without trapping them on a program that actually discourages them from reaching their full potential. A phenomenon known as the “welfare cliff” occurs when someone decides to work less hours or for lower pay in order to continue to meet income thresholds for government benefits. Medicaid expansion would create this type of cliff. Such a condition is detrimental to taxpayers, who have to continue to support that person; to the economy, which misses out on that person’s unique contributions; and to the individual, who is stuck in poverty and forfeits the positive benefits of gainful employment.

If we can continue making strides towards a strong economy, a culture that values work, and a more affordable healthcare sector for all, the closing of the healthcare coverage gap will just be a positive side effect. The North Carolina Healthcare Association and other Medicaid expansion proponents claim to be interested in helping North Carolinians. But it is no kindness to trap people on government dependency when we could foster a state that helps people achieve self-sufficiency.