By Jocelyn Guyer and Martha Heberlein

We’ve just finished up a new report that looks at what might happen if the Medicaid and CHIP stability protections are rescinded, opening the door for states to cut off coverage for kids, seniors, people with disabilities, and other low-income adults.  It isn’t a pretty picture – about a third of Medicaid and CHIP beneficiaries are covered at “state option” and are at risk of being cut if the protections aren’t in place.  Repeal would jeopardize the health care coverage for children and families struggling to gain solid footing after turbulent economic times, as well as senior citizens unable to care for themselves in their own homes and people with disabilities who need help with long-term care services.

Along with providing new estimates on how many people would be put at risk, the report reviews what happened during the last recession when robust stability protections were not in place for much of it.  This experience suggests that a number of states really will impose deep cuts with long-lasting impacts if the stability protections are rescinded. Of particular concern for kids – close to half of states in the last recession added new red-tape barriers to application and renewal procedures making it harder for eligible uninsured kids to get signed up for coverage.  Such “back-door” strategies seem to fly below the public radar screen, but can be just as effective at depressing enrollment as slashing coverage.  For example, during the last recession, Texas dropped 215,000 kids from coverage (more than 40% of its enrollment) by imposing a new requirement on families that they renew their kids coverage every six months and by putting up other roadblocks to coverage.*

With the Governors heading to town this weekend for a Winter meeting and an upcoming House Energy and Commerce Committee hearing entitled “The Consequences of Obamacare: Impact on Medicaid and State Health Care Reform”, the chances are high that we are going to hear a lot of debate about the stability protections and whether they should be repealed.  In light of this, we encourage you to read the whole paper if you can swing it. But, if you just want the quick and dirty, our key findings are:

• The coverage of more than a third of Medicaid and CHIP beneficiaries is at risk if the stability protections are rescinded.  States could reduce coverage to mandatory federal minimum levels in Medicaid and scale back or even entirely eliminate their CHIP programs.  Overall, an estimated 35 percent of all Medicaid and CHIP beneficiaries are covered at state option, including 14.1 million children; 8 million adults; 2.8 million low-income seniors; and 2.3 million people with disabilities.
• Even people who remain eligible for coverage will be vulnerable to cuts through “backdoor” strategies.  If the stability protections are rescinded, states can re-introduce red-tape barriers to coverage.  While not as obvious as reducing eligibility levels, these “backdoor” strategies for depressing enrollment can be extremely effective at cutting coverage.  In the last recession, close to half of all states used such strategies to make it more difficult for eligible uninsured children to enroll in coverage.
• The nation’s progress in covering children could unravel.  Through Medicaid and CHIP, the country has successfully driven the uninsured rate of children down to the lowest level on record.  This progress could quickly unravel if states freeze enrollment in their CHIP programs or add new red-tape barriers to coverage.  Children may also be indirectly at risk if their parents are cut from coverage, as there is strong evidence that children fare better when their family as a whole is insured. During the last recession, parents and other adults bore the brunt of the reductions in eligibility.

We recognize that states are facing tough budget pressures, but blaming Medicaid for their budget woes won’t help them balance their budgets.  In fact, if policymakers take an objective look at this issue, they may find that cutting Medicaid and CHIP will not only impact the health and well-being of children and families, it could cause rampant job losses in the health care sector that would reverberate through the state economy. In the long-run, that could make their budget problems worse.

States also still have broad flexibility in their Medicaid and CHIP programs. Given that 50 million people already are without coverage and the economic recovery remains tenuous, the focus should be on strengthening their commitment to these vital programs and re-doubling their efforts to find more efficient, cost-effective ways to manage them.  This is not the time to add to the ranks of the uninsured, especially when better alternatives are available.

*Editor’s Note: A prior version of this blog cited a lower figure of 149,000 (29%), reflecting the decline in enrollment between September 2003 and June 2004. This updated number represents the decline in enrollment until September 2007, when the 12-month renewal period was reinstated.