February 9, 1999
Employed But Not Insured
by Jocelyn Guyer and Cindy Mann
Table of Contents
II. Data on Uninsured Parents
III. State Medicaid Coverage for Parents
IV. States Have a New Opportunity to Expand Medicaid to Cover More Low-Income Working Parents
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III. State Medicaid Coverage for Parents
In virtually all states, Medicaid eligibility rules for working parents are much more restrictive than the rules that apply to their children. In general, to be eligible for Medicaid, parents must have income and resources that fall below a state's Medicaid income and resource thresholds for the state's family coverage category. To date, states generally have set these thresholds at the same levels as the income and resource thresholds that they use to determine eligibility for cash welfare. As a practical matter, this means that most parents can enroll in Medicaid only if they have income and resources low enough to qualify for welfare.
Moreover, some 21 states restrict Medicaid coverage to parents in single-parent families and to parents in a small portion of two-parent families. In these states, parents in two-parent families who work are even less likely to qualify for Medicaid than parents in single-parent households.
In contrast, all states provide health care coverage through Medicaid (and, in some states, through separate child health insurance programs) to children at significantly higher income levels, and eligibility for children generally does not depend on whether they are part of a single-parent or a two-parent family. In addition, 40 states have dropped the resource test for children applying for Medicaid.
State Medicaid Earnings Thresholds for Parents
Table 3 shows how much an uninsured parent in a three-person family who is applying for Medicaid can earn on a monthly or annual basis and still be found eligible for coverage in each state. Table 4 shows how many hours a week such a parent can work and still be found eligible for Medicaid. Both tables look at gross income before taxes and other work-related expenses are taken into account.
How to Read Tables 3 and 4
Table 3 shows how much a working parent in a three-person family can earn and still be found eligible for Medicaid. For example, it shows that in Florida a parent in a three-person family can earn no more than $391 a month and still be found eligible for Medicaid. On an annual basis, such a parent can earn no more than $4,704 a year in Florida, an amount that is equivalent to 34 percent of the poverty level.
Table 4 provides the same information, but it is presented in terms of the number of hours a parent can work and still be found eligible for Medicaid. For example, in Alabama a parent in a three-person family can work no more than eight hours a week at a job that pays $7 an hour and be found eligible for coverage. If the parent is employed at a job that pays the federal minimum wage of $5.15 an hour, he or she can work no more than 11 hours a week and still be found eligible for coverage in Alabama.
Both Tables 3 and 4 show the thresholds applicable to parents who are applying for Medicaid, who are not on welfare, whose only source of income is from earnings, and who do not pay child care expenses out-of-pocket. If parents have income from sources other than earnings, lower income eligibility thresholds than those presented in Tables 3 and 4 might apply. At the same time, if they pay out-of-pocket for child care expenses, they may be eligible for Medicaid at higher income levels because child care costs (generally up to a capped amount) are deducted from gross earnings. See Appendices B and C for a detailed description of the methodology used to compile the data for these tables and for additional state-specific information.
The earnings thresholds presented in Table 3 are a function of a state's Medicaid "net" or "countable" income standard and the disregards it allows for families with earnings.(1) When states define what counts as income for purposes of determining Medicaid eligibility, under federal law they must at a minimum "disregard" (i.e., not count) $90 of a Medicaid applicant's monthly earnings to account for certain work-related expenses. The law, however, allows states to disregard more than the required minimum of $90. Higher disregards, in effect, raise the state's earnings threshold for working families. For example, a state with a Medicaid net or countable income standard of $500 a month could decide to disregard $200 in earnings. If it does so, the earnings threshold for a working parent in that state would be $700 ($700 - $200 earnings disregard = $500, the state's countable income standard). There is wide variation among states with respect to both their net or countable income standards and their earnings disregard policies.
How Much Can a Working Parent Who is Applying for Medicaid
Earn and Still Be Eligible for Coverage?
(Based on a 3-person family with one wage earner.
Assumes that the family's only source of income is earnings.)
Monthly Earnings Threshold Annual Earnings Threshold Earnings Threshold
as a Percent of the
Federal Poverty Level
Alabama $253 $3,036 22% Alaska $1,181 $14,172 83% Arizona $584 $7,011 51% Arkansas $255 $3,060 22% California $864 $10,368 76% Colorado $510 $6,120 45% Connecticut* $866 $10,392 76% Delaware** $1,228 $14,730 108% District of Columbia $2,275 $27,300 200% Florida $392 $4,704 34% Georgia $513 $6,156 45% Hawaii** $1,309 $15,708 100% Idaho $406 $4,872 36% Illinois* $597 $7,164 52% Indiana $377 $4,524 33% Iowa $1,063 $12,750 93% Kansas $493 $5,916 43% Kentucky $615 $7,380 54% Louisiana $263 $3,156 23% Maine $1,227 $14,724 108% Maryland* $523 $6,276 46% Massachusetts** $1,513 $18,156 133% Michigan $548 $6,576 48% Minnesota** $3,128 $37,538 275% Mississippi $457 $5,484 40% Missouri $381 $4,572 33% Montana $833 $10,000 73% Nebraska* $490 $5,880 43% Nevada $1,020 $12,240 90% New Hampshire $686 $8,235 60% New Jersey $533 $6,396 47% New Mexico $702 $8,424 62% New York $666 $7,992 59% North Carolina $634 $7,608 56% North Dakota $845 $10,140 74% Ohio $972 $11,664 85% Oklahoma $426 $5,112 37% Oregon** $1138 $13,650 100% Pennsylvania $804 $9,648 71% Rhode Island $2,194 $26,333 193% South Carolina $658 $7,896 58% South Dakota $796 $9,546 70% Tennessee $766 $9,192 67% Texas* $364 $4,368 32% Utah* $657 $7,884 58% Vermont** $1,797 $21,564 158% Virginia $380 $4,560 33% Washington $1,090 $13,080 96% West Virginia $342 $4,104 30% Wisconsin $737 $8,844 65% Wyoming $789 $9,468 69% Median state $666 $7,992 59% Unless otherwise noted, the earnings thresholds presented in this table are based on the income standards andearnings disregards used by states under their family coverage categories. States marked with an "*" have not yet established a family coverage category and base their earnings thresholds on the state's medically needy eligibility rules. States marked with "**" have expanded coverage to low-income working parents under a waiver of federal law and the table is based on the eligibility rules that apply to parents under the waiver. See Appendices B and C for additional information.
Table 4 How Many Hours Can a Parent Who is Applying for
Medicaid Work and Still Be Eligible for Coverage?
(Based on a 3-person family with one wage earner.
Assumes that the family's only source of income is earnings.)
At a $7 an hour job, can a parent work full time? If no, how many hours a week can a parent work? At the federal minimum wage ($5.15 per hour), can a parent work full time? If no, how many hours a week can a parent work? Alabama NO 8 NO 11 Alaska NO 39 YES Arizona NO 19 NO 26 Arkansas NO 8 NO 11 California NO 28 NO 39 Colorado NO 17 NO 23 Connecticut* NO 29 NO 39 Delaware ** YES YES District of Columbia YES YES Florida NO 13 NO 18 Georgia NO 17 NO 23 Hawaii** YES YES Idaho NO 13 NO 18 Illinois* YES 20 NO 27 Indiana NO 12 NO 17 Iowa NO 35 YES Kansas NO 16 NO 22 Kentucky NO 20 NO 28 Louisiana NO 9 NO 12 Maine YES YES Maryland* NO 17 NO 23 Massachusetts** YES YES Michigan NO 18 NO 25 Minnesota** YES YES Mississippi NO 15 NO 20 Missouri NO 13 NO 17 Montana NO 27 NO 36 Nebraska* NO 16 NO 22 Nevada NO 34 YES New Hampshire NO 23 NO 36 New Jersey NO 18 NO 24 New Mexico NO 23 NO 31 New York NO 22 NO 30 North Carolina NO 21 NO 28 North Dakota NO 28 NO 38 Ohio NO 32 YES Oklahoma NO 14 NO 19 Oregon** NO 38 YES Pennsylvania NO 27 NO 36 Rhode Island YES YES South Carolina NO 22 NO 29 South Dakota NO 26 NO 36 Tennessee NO 25 NO 34 Texas* NO 12 NO 16 Utah* NO 22 NO 29 Vermont** YES YES Virginia NO 13 NO 17 Washington NO 36 YES West Virginia NO 11 NO 15 Wisconsin NO 24 NO 33 Wyoming NO 26 NO 35 Median state NO 21 NO 28 Unless otherwise noted, the earnings thresholds presented in this table are based on the income standards and earnings disregards used by states under their family coverage categories. States marked with an "*" have not yet established a family coverage category and base their earnings thresholds on medically needy eligibility rules. The states marked with "**" have expanded coverage to low-income working parents under a waiver of federal law and the table is based on the eligibility rules that apply to parents under the waiver. See Appendices B and C for additional information. Some states have minimum wage levels that are higher than the federal level.
In some states, somewhat higher earnings thresholds for ongoing Medicaid coverage apply to parents who first qualify under the thresholds shown in Tables 3 and 4 and who then find a job or increase their earnings. States have adopted these more generous eligibility rules for parents already enrolled in Medicaid in order to allow them to increase their earnings without losing ongoing coverage. In some states, these more generous rules for calculating financial eligibility for Medicaid recipients are time-limited. The earnings thresholds that states use to determine the ongoing eligibility of a parent who already is enrolled in Medicaid are shown in Tables 6 and 7 in Appendix A.
Missouri and Wisconsin Have Approved, But Not Yet Implemented, Expansions of Coverage for Low-Income Working Parents
This report is based on the earnings thresholds for parents that are currently in place in the states. However, both Missouri and Wisconsin have adopted expansions in Medicaid for low-income working parents that they plan to implement later in 1999. Wisconsin has expanded Medicaid to parents with income up to 185 percent of the poverty level and then will allow them to remain enrolled until their income reaches 200 percent of the poverty level. Missouri's expansion, which is slated for implementation later this month, covers parents with income up to 100 percent of the poverty level and certain non-custodial parents with income up to 125 percent of the poverty level.
In addition, all states are required by federal law to provide up to twelve months of "Transitional Medical Assistance" to parents enrolled in Medicaid who lose their eligibility for ongoing coverage due to earnings.(2) Twelve states have received waivers to extend TMA for longer than 12 months.(3)
Both the provision of time-limited TMA and the use in selected states of more generous eligibility rules for parents already enrolled in Medicaid assure that these parents can increase their earnings somewhat without losing health care coverage, at least for a period of time. These rules are an important source of coverage for some low-income working parents, especially those entering or re-entering the low-wage job market after a period of unemployment. However, these rules provide Medicaid at somewhat higher income levels only to those parents who were unemployed or whose incomes were so low that they could qualify for coverage under the much more restrictive rules that generally apply to applicants. They are not a substitute for covering low-income parents more broadly, and they raise equity issues because they do not help low-income parents who consistently have been working at low-wage jobs.
Medicaid for Parents in Two-Parent Families
Until recently, states could not cover parents in two-parent families to the same extent that they covered parents in single-parent families unless they had a waiver of standard federal rules allowing them to do so. Under these rules, which relate back to the old AFDC program, parents in two-parent families can qualify for Medicaid only if one of the two parents in the family is incapacitated or "unemployed" which is defined as working fewer than 100 hours a month. In August of 1998, the U.S. Department of Health and Human Services issued a regulation allowing states to effectively drop the 100-hour rule limitation for two-parent families without having to secure a federal waiver.(4) States that have waivers or that take advantage of the flexibility offered by the new regulation can provide Medicaid to parents in two-parent families to the same extent that they offer coverage to parents in single-parent families.
Table 5 shows which states provide Medicaid to parents in two-parent families to the same extent as they provide coverage to parents in single-parent families. As of the fall of 1998, 29 states and the District of Columbia had dropped the limitations on covering parents in two-parent families.(5) In the remaining 21 states, low-income working parents in single-parent families will have greater access to Medicaid than parents in two-parent families. For example, Pennsylvania provides coverage to a mother with two children who earns the minimum wage and works up to 36 hours a week, as shown in Table 3. But, as a result of the 100-hour rule limitation, Pennsylvania does not cover the parents in a two-parent family if the principal wage earner (either the husband or the wife) works at the minimum wage more than 100 hours a month (or an average of 23 hours a week).
Additional States Are Planning to Improve
Coverage of Two-Parent Families
In the process of gathering information for Table 5, the Center was informed by a number of states that they plan to eliminate the 100- hour rule sometime in 1999. Thus, the number of states that provide coverage to parents in two-parent families on the same terms that they make coverage available to single-parent families may increase noticeably in the next several months.
Table 5 Which States Cover Two-Parent Families to the Same Extent as Single-Parent Families?
(States cover two-parent families to the same extent as single-parent families if they have eliminated the "100 hour rule," a requirement that the principal wage earner in a two-parent family work fewer than 100 hours per month.)
Cover two-parent families to the same extent as single-parent families? Alabama No Alaska No Arizona Yes Arkansas No California New applicants No; Recipients - Yes Colorado No Connecticut New applicants No; Recipients Yes Delaware ** Yes District of Columbia Yes Florida No Georgia Yes Hawaii ** Yes Idaho Yes Illinois * Yes Indiana Yes Iowa Yes Kansas Yes Kentucky No Louisiana No Maine No Maryland * Yes Massachusetts ** Yes Michigan Yes Minnesota ** Yes Mississippi Yes Missouri Yes Montana Yes Nebraska * No Nevada Yes New Hampshire No New Jersey No New Mexico Yes New York Yes North Carolina Yes North Dakota No Ohio Yes Oklahoma No Oregon Yes Pennsylvania No Rhode Island Yes South Carolina Yes South Dakota Yes Tennessee No Texas Yes Utah No Vermont ** Yes Virginia Yes Washington Yes West Virginia No Wisconsin No Wyoming No Unless otherwise noted, the information presented in this table is based on a state's rules for two-parent families under its family coverage category. States marked with an "*" have not yet established a family coverage category, but do have a medically needy category and the information in this table is based on their medically needy eligibility rules. States marked with "**" have expanded coverage to low-income working parents under a waiver of federal law and the table is based on the eligibility rules that apply to parents under the waiver. See Appendices B and C for additional information.
IV. States Have a New Opportunity to Expand Medicaid to Cover More Low-Income Working Parents
The low earnings thresholds that operate to exclude many low-income working parents from Medicaid coverage and the limitations on covering parents in two-parent families result from the historic link between Medicaid and the now-repealed Aid to Families with Dependent Children (AFDC) program. Until 1996, federal Medicaid law largely limited states to covering low-income parents who received or who had recently received welfare under the AFDC program. A few states, such as Massachusetts, Minnesota, and Vermont, secured special waivers of federal Medicaid law from the Health Care Financing Administration, which administers Medicaid on the federal level, allowing them to provide Medicaid to low-income parents not on welfare. The waiver process, however, often involved lengthy and complex negotiations with HCFA, including a guarantee that any increase in federal Medicaid spending that might result from a state's proposed expansion in coverage would be fully offset by federal savings generated by other changes in state Medicaid policies.
When the federal welfare law was enacted in August of 1996 and the AFDC program was repealed, eligibility for Medicaid was "delinked" from eligibility for welfare. Under current federal law, a parent's receipt of welfare does not determine his or her eligibility for Medicaid. In place of the link between welfare and Medicaid eligibility, federal law established a new family coverage category. Under this category, at a minimum, states must cover parents who meet the income and resource standards and conform to certain of the family composition rules that they used in their AFDC programs on July 16, 1996. States can, however, expand eligibility for families with children under the new category beyond these minimum standards, and, as discussed above, states can eliminate the restrictive family composition rules that limit coverage for parents in two-parent families.
The 1996 federal welfare law thus created a new opportunity for states to cover a broader group of low-income working parents. The new option is available to all states without the need to secure a waiver. Moreover, the federal government will finance anywhere from 50 percent to 77 percent of the cost of expanding Medicaid to low-income working parents, with the exact portion determined by each state's regular Medicaid matching rate (see Table 8 in Appendix D).(6)
How Does the Parent Expansion Option Relate to
the New Child Health Insurance Program (CHIP)?
The Balanced Budget Act of 1997 created a child health block grant that can be used by states to expand Medicaid for children or to establish or expand separate child health insurance programs. Although there are some limited exceptions, the child health block grant funds generally cannot be used to provide health care coverage to parents.
States that are interested in providing health care to all members of low-income families not just to the children in these families can do so by combining the Medicaid parent expansion option discussed here with the opportunities created by the child health block grant to expand coverage for children. For example, a state could expand Medicaid to cover both the parents and the children in low-income working families and receive the enhanced federal matching payments available under the child health law for the children's coverage. Wisconsin, which will soon implement an expansion of coverage to parents and children with income below 185 percent of the poverty level under an 1115 waiver, has adopted this approach. Alternatively, a state could elect to expand Medicaid to some of the parents whose children are eligible for coverage under the state's Medicaid program. In Rhode Island, children are eligible for Medicaid up to 250 percent of the poverty level and parents are now eligible if their incomes are below 185 percent of the poverty level.
Although the new opportunity is an option to expand Medicaid for families with children, not just for parents, states have long had broad flexibility to expand Medicaid to cover children in low-income working families. Moreover, the new child health block grant created by the Balanced Budget Act of 1997 further encouraged states to expand coverage for children by making enhanced federal payments available for such coverage. The option created by the 1996 federal welfare law is significant, therefore, because for the first time it allows states to expand Medicaid to low-income working parents without securing a federal waiver.
States Also Can Relax or Eliminate Their Resource Test for Parents
Along with meeting a state's income test, a parent seeking Medicaid generally must also meet a resource test. As with their income test, states have broad flexibility to design their resource test for parents. If a state has not taken advantage of this flexibility to expand or eliminate its resource limit, a parent seeking Medicaid is generally ineligible for coverage if she has more than $1,000 in resources (not counting part of the value of the family's car and a small number of other items).
Several states have already adopted more generous resource rules. For example, Ohio and Oklahoma have eliminated the Medicaid resource test for parents. Other states, such as Kansas, have elected to disregard the full value of a family's car when evaluating whether a parent meets their Medicaid resource test.
Rhode Island and the District of Columbia already have taken advantage of the parent expansion opportunity. As a result of these expansions, low-income working parents can be employed full-time at jobs that pay up to $12 an hour in Rhode Island and up to $13 an hour in the District of Columbia and be eligible for Medicaid.
- District of Columbia In October 1998, the District of Columbia created a new program call "DC Healthy Families" that provides Medicaid to families with children with income up to 200 percent of the poverty level ($27,300 for a family of three), including the parents in these families. Under the District's new program, families with children are eligible for coverage regardless of whether they are headed by a single parent or by two parents. Moreover, the District does not require families to meet a resource test in order to be eligible for coverage.
- Rhode Island In November, 1998, Rhode Island expanded Medicaid to families with children with net or countable income up to 185 percent of the poverty level ($25,252 for a family of three). Since the state already had covered children at even higher income levels, this expansion served to extend Medicaid to some, although not all, of the parents of children already covered under Medicaid in Rhode Island. As in the District of Columbia, parents do not need to meet an asset test in order to be eligible for Medicaid under the expansion, nor is coverage limited to single-parent families.
Missouri and Wisconsin also have decided to expand Medicaid to a broader group of low-income working parents in recent months, joining the ranks of states such as Delaware, Hawaii, Massachusetts, Minnesota, Oregon, and Vermont that have used the 1115 waiver process to cover parents at higher income levels (see box in Chapter 3 for details). In both states, the parent expansions are part of larger health care expansions designed to provide support to low-income families trying to get by in the low-wage job market.
Until recently, states have had little opportunity under federal law to provide Medicaid to low-income working parents without regard to whether they were receiving or had recently received welfare. As a result, uninsured parents seeking to support their families by working at low-wage jobs are largely ineligible for coverage through Medicaid if they work more than a few hours each week. Indeed, parents who work enough to bring their families' income up to the federal poverty level are ineligible for Medicaid in all but a handful of states. At the same time, low-income parents often do not have access to employer-sponsored health care coverage through their jobs. Given their limited access to Medicaid and to employer-sponsored coverage, low-income parents are uninsured at high rates.
However, as this report illustrates, some states have taken advantage of federal Medicaid matching payments to provide coverage to low-income working parents more broadly. In these states, low-income parents can work full time without fear of being uninsured. As the result of the provision in the 1996 federal welfare law that delinked TANF and Medicaid eligibility, all states now have the opportunity to provide health care coverage to low-income working parents through Medicaid without seeking a federal waiver.
Until more states seize upon the new opportunity, the number of uninsured low-income parents is likely to grow as changes in welfare programs and the strong economy result in more parents working at low-wage jobs do not offer health insurance. By taking advantage of the new option, states can lower dramatically the number of uninsured parents in their state and provide critical support to low-income working families.
1. The income eligibility thresholds shown in these tables vary from (and are generally higher than) the net or countable income eligibility thresholds states will commonly report as their Medicaid income thresholds for families with children. The thresholds reported here provide information on the total amount of earnings a family can have and still be eligible for Medicaid, while net or countable income thresholds indicate the total amount of income a family can have and still be eligible for Medicaid after certain deductions are taken into account.
2. States must provide six months of TMA without regard to how much a family earns, and an additional six months as long as the family's gross earnings less child care expenses are below 185 percent of the poverty level.
3. Jan Kaplan, Transitional Medicaid Assistance (Washington, D.C., Welfare Information Network, December 1997).
4.Federal Register, Volume 63, Number 152, August 7, 1998.
5. Two additional states California and Connecticut have eliminated the 100-hour rule requirement for two-parent families already enrolled in Medicaid, but have retained the rule for adults in two-parent families applying for coverage.
6. For a detailed discussion of how the 1996 federal welfare law changes make it possible for states to expand coverage to low-income working parents, see Guyer and Mann, Taking the Next Step: States Can Now Take Advantage of Federal Medicaid Matching Funds to Expand Health Care Coverage to Low-Income Working Parents, Center on Budget and Policy Priorities, August 20, 1998.
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