Trump Administration Proposes to Make Many Fewer Low-Income Individuals and Families Eligible for Medicaid and CHIP Over Time

The Trump Administration has proposed to change how the Census Bureau’s Official Poverty Measure (OPM) is adjusted annually for inflation.  While this sounds like a highly technical change, it would do considerable harm.

That is because the OPM is used to set the federal poverty line, which in turn is used to determine income eligibility for programs such as Medicaid and CHIP (as well as for eligibility and financial assistance amounts under the Affordable Care Act’s marketplace subsidies).  The Administration is floating a proposal to use a lower annual adjustment, which would result in fewer and fewer people eligible and a larger and larger number of uninsured over time, relative to current law.  Comments on this damaging proposal are due June 21, 2019 and can be submitted here.

The OPM, and in turn the federal poverty line, is currently annually adjusted by general inflation (the Consumer Price Index for All Urban Consumers or CPI-U).  The Administration is seeking comment on potentially using a different annual adjustment, including the chained CPI (the Chained Consumer Price Index for All Urban Consumers or C-CPI-U), likely in order to pave the way for a formal change to adopt the chained CPI.  But as the Congressional Budget Office has previously explained, the chained CPI will result in lower estimates of annual inflation than the current measure of general inflation (CPI-U).

With smaller annual adjustments to the federal poverty line, the income eligibility limits for Medicaid and CHIP (e.g. the maximum amount of income a family can earn for a household of that size) will be lower than they otherwise would be in any given year, with the reductions growing larger over time.  In other words, the Administration is effectively proposing to impose an automatic cut to eligibility, adversely affecting low-income children (as well as parents, pregnant women, seniors and people with disabilities), with the magnitude of the cut becoming sharper each year.

The Administration tries to justify a move to chained CPI by implying it would be a more accurate measure of inflation than general inflation.  But as the Center on Budget and Policy Priorities finds, research indicates that inflation may actually tend to rise faster for low-income households than for households overall.  For example, costs for rental housing, on which low-income households disproportionately rely, have recently been growing faster than general inflation.  In fact, as CBPP notes, if the federal government is to consider any changes to how the federal poverty line is determined, it should make adjustments that would effectively raise it.  For example, it should fully account for expenses that many low-income families incur such as child care, which is not the case today.

The chained CPI proposal is just the latest in a series of Administration actions that have contributed to a striking reversal in health coverage in the United States.  The Congressional Budget Office now expects the number of non-elderly uninsured to be more than 7 million higher in 2029 than in 2016.  The number of children on Medicaid and CHIP has fallen by 840,000 between 2017 and 2018, according to administrative data, with many likely ending up uninsured.  And Census data show the first increase in the share of children without health coverage in 2017 in at least a decade.  As a result, the proposal should be firmly rejected.

Edwin Park
Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy.

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