Millions of Uninsured And Underinsured Children Are Eligible For Medicaid
by Laura Summer, Sharon Parrott and Cindy Mann

Overview

In 1995, some 3.1 million poor children under age 18 — approximately 21 percent of all poor children — had no health insurance coverage.⁽¹⁾ Yet, many of these children could have been insured because they were eligible for Medicaid, but were not enrolled in the program.

Medicaid now offers health insurance coverage to a broad group of poor children as a result of expansions in eligibility that began in the late 1980's and that are being phased in over time. Under federal law, children under age six are eligible for Medicaid if their family income is below 133 percent of the federal poverty line. Children between the ages of six and 13 are currently eligible if their family income is below 100 percent of the poverty line. Each year a new age group of children is "phased in" so that by the year 2002, all poor children under age 19 will be eligible for Medicaid.

Eligibility for coverage, however, does not necessarily translate into actual coverage. This analysis examines national and state-specific Medicaid participation rates for children under age 11 and finds that large numbers of income-eligible children were not enrolled in the program.⁽²⁾ Many of these children lacked any health insurance coverage, while the rest had some health insurance but likely received less adequate coverage than is available under state Medicaid programs.

• Nationally, in 1994, one-fifth of all poor and near-poor children under age 11 who were income-eligible for Medicaid — nearly 2.7 million children — were neither enrolled in Medicaid nor covered by any other form of health insurance.⁽³⁾ Nearly 80 percent of these children lived in families with earnings.

  These 2.7 million children accounted for nearly half of all the children under age 11 who were uninsured in 1994. If these Medicaid-eligible children had been enrolled in the program, the number of uninsured children under age 11 would have been reduced by as much as 45 percent.

• An additional 2.1 million children under age 11 who were eligible for Medicaid but not enrolled in the program had some form of private health insurance coverage at some time during the year. Despite being covered by private health insurance, many of these children could have benefitted from participating in the Medicaid program. First, private plans available to families with very low-paying jobs often provide only minimal coverage and frequently require families to pay a high portion of the costs of coverage and services. Medicaid can supplement private insurance and relieve families of unaffordable premiums, deductibles and copayments that can create barriers to accessing health care. In addition, some of these children had health insurance for only part of the year. Medicaid coverage would have allowed them to be insured throughout the year.

  This analysis also provides state-level estimates of the number and proportion of children eligible for Medicaid but not enrolled in the program. These figures show that there are substantial numbers of children in every state who are not currently reached by the Medicaid program, despite their eligibility for coverage. Participation rates across all states do vary considerably. However, due to the limited sample sizes in a number of states, comparisons between individual states should be avoided.

  The new welfare law (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 or "PRWORA") could lead to even lower Medicaid participation rates in the future. The new law makes profound changes in the welfare system and in the relationship between cash assistance and Medicaid. The AFDC program is replaced with a block grant that allows states broad flexibility to develop new rules for income support and work programs while imposing stringent new work requirements and time limits. Large numbers of families may no longer be eligible for assistance as a result of federally-mandated or state-imposed restrictions that will limit eligibility for cash aid and work programs. While the new law preserves Medicaid eligibility for families who would have qualified for Medicaid under the prior law, the data show that children in families who do not receive cash aid are much less likely to enroll in the Medicaid program.

  In 1994, only 38 percent of children under age 11 who did not receive cash assistance but were eligible for Medicaid were enrolled in the Medicaid program. In other words, almost two-thirds — 62 percent — of all children who were not receiving welfare but who were eligible for Medicaid were not enrolled in the program. More than half of these children were wholly uninsured.⁽⁴⁾

  Moreover, Medicaid participation may drop even among those children who remain eligible for cash assistance under the new block grant programs. Under the new law, states are no longer required to automatically enroll children who receive assistance under the block grant in the Medicaid program. This could result in significant numbers of eligible children not receiving Medicaid if states do not take steps to assure that these very poor children are enrolled in the program.

  The welfare changes also are expected to result in many families becoming ineligible for cash assistance because more parents will find jobs. Children in these families are likely to remain eligible for Medicaid if their parents have low earnings, but participation rates among children in working poor and near-poor families are particularly low. As noted above, nearly 80 percent of the uninsured children under age 11 who were eligible for Medicaid in 1994 but not enrolled in the program lived in families with earnings.

  Children in families that become ineligible for cash assistance because their parents find jobs are unlikely to be covered by employer-sponsored health insurance.

  In April 1993, only roughly 40 percent of workers earning less than $5 an hour had employers that offered any of their employees health care coverage, and many workers whose employers did offer coverage were not eligible to enroll in the employer-based plans often because they worked part time.

  Only 13 percent of all workers earning less than $5 an hour had employer-based coverage for both themselves and their families.⁽⁵⁾

  The expansions in Medicaid eligibility, still being phased in, could offset the reduction in coverage resulting from the decline in employer-sponsored coverage among poor children and could allow millions of uninsured and underinsured children greater access to health care. These data indicate, however, that the changes in welfare policy and declining employer-based coverage are likely to result in even more children being uninsured despite their eligibility for Medicaid unless states improve outreach and redesign their Medicaid enrollment procedures.

   

  Eligibility For Medicaid Has Expanded In Recent Years

  To consider Medicaid participation rates both nationally and in individual states, it is important to begin with a review of the Medicaid eligibility rules. Medicaid began as a program that provided health care coverage exclusively to individuals and families receiving cash assistance. Over the last decade, bipartisan support for covering a greater portion of uninsured children under the Medicaid program has allowed large numbers of poor and near-poor children who are not receiving cash assistance to qualify for Medicaid coverage. The shift in the Medicaid caseload has been dramatic. In 1990, fewer than one-third of the children covered by Medicaid did not receive cash assistance. Four years later, 45 percent of the children served by the Medicaid program were not receiving cash aid.⁽⁶⁾

  Recent changes in federal Medicaid eligibility rules are largely responsible for the expansions in Medicaid coverage among low-income children who do not receive cash assistance. Currently, under federal law, children under age six with income below 133 percent of the poverty line and children ages six through 13 with income below 100 percent of the poverty line are eligible for Medicaid. Eligibility for older poor children is being phased in, so that by the year 2002, all poor children under age 19 will be eligible for coverage.⁽⁷⁾

  These minimum federal eligibility requirements, moreover, have been augmented in many states; 40 states have expanded coverage beyond the federal requirements to make the Medicaid program available to even more children who need health insurance coverage. Currently, some 35 states and the District of Columbia provide Medicaid coverage for infants at income levels above those mandated by federal law, and twelve states have raised the income limits for children through age six. In addition, 23 states have speeded up the phase-in of eligibility for older children, extending Medicaid coverage to children above the age limits required by federal law. For these older children, eleven states have raised the income limit above the income limit required by federal law. A table listing state Medicaid income eligibility standards for children, based on a Center on Budget and Policy Priorities' survey of the 50 states and the District of Columbia, is presented in Appendix I.

  In addition, since the passage of the Family Support Act in 1988, Medicaid coverage has been available to families who become ineligible for welfare because they have new or increased earnings or child support. This "transitional" Medicaid coverage is time-limited, but nonetheless is intended to assure that families do not lose their health care coverage immediately upon finding a job or receiving child support that makes them ineligible for welfare.⁽⁸⁾

   

  Many Children Who Are Eligible for Medicaid Are Not Enrolled in the Program

  Millions of children who are eligible for Medicaid under these expanded Medicaid eligibility rules are not participating in the program. Although Medicaid income eligibility standards vary among states, it is possible to examine Medicaid participation rates across all states by determining the portion of children whose family income is below the federal minimum standards who are participating in the Medicaid program. In 1994, children under age six with family incomes below 133 percent of the federal poverty line and children ages six through 11 with family incomes below 100 percent of the federal poverty line were eligible for Medicaid.⁽⁹⁾

  More than one-third of all children under age 11 who were eligible for Medicaid were not enrolled in the program in 1994. This represented 4.8 million children.

• More than half of the 4.8 million children eligible but not enrolled in Medicaid — nearly 2.7 million children — were wholly uninsured. Stated another way, one-fifth of all children who were eligible for Medicaid lacked any form of health insurance.

  These 2.7 million children account for 45 percent of the 5.9 million children under age 11 who were uninsured in 1994.

  Nearly 80 percent of the children who were eligible for Medicaid but who were wholly uninsured — more than 2 million children — lived in families with earnings.

  An additional 2.1 million children who were eligible for Medicaid but not enrolled had some form of private health insurance. Despite having private health insurance, many of these children could have benefitted from the Medicaid program. Medicaid pays for those benefits that are covered by Medicaid but not covered by the private plan and helps families afford the premiums, deductibles and copayments charged by their private health insurance.

  It is not possible to determine from the data what type of insurance these 2.1 million children had. However, many poor children with private insurance coverage are likely to have limited benefit packages that may not cover preventive care or specialty services. Thus, while these 2.1 million children fall into the "insured" category, they may lack access to routine care, and those with special health care needs may not be able to access the medical care they require. In addition, some of these 2.1 million children were covered by private health insurance for only part of the year. (The Census data do not distinguish between children covered for part and all of the year.) Medicaid coverage would have ensured that these children were not left uninsured during those months when they were not covered by private insurance.⁽¹⁰⁾

  Since cash assistance recipients in 1994 were automatically enrolled in Medicaid, the Medicaid participation rates among children who did not receive cash aid are particularly telling. These rates are quite low:

  Nationally, in 1994, only 38 percent of poor and near-poor children who did not receive AFDC or SSI but who were eligible for Medicaid were enrolled in the program. In other words, almost two-thirds — 62 percent — of all children under age 11 who were not receiving welfare but who were eligible for Medicaid were not enrolled. More than half of these children were wholly uninsured.

  These very low participation rates among children who do not receive cash assistance are particularly worrisome given program changes prompted by the new welfare law that are likely to result in many fewer children receiving cash aid.

  State Estimates

  Table I shows estimates for each state of the number and proportion of Medicaid-eligible children who were not enrolled in the program. These estimates are based on data from 1992-1995. While small sample sizes make comparing participation rates across states ill-advised, taken as a whole, the data do show state variation in the participation rates among eligible children in the Medicaid program.

  There are many reasons for such variation. One reason why participation rates will vary is that states in which a larger proportion of poor and near-poor children participate in the AFDC or SSI programs will tend to have a larger proportion of eligible children participating in the Medicaid program. Table II addresses this issue and shows the proportion of income-eligible children not receiving AFDC and SSI who were not enrolled in Medicaid.

  In addition, states in which a larger portion of Medicaid-eligible children have private health insurance coverage may have lower Medicaid participation rates. Table III shows the proportion of eligible children not receiving AFDC or SSI who were wholly uninsured.

  The variations in Medicaid participation rates across states may also be due in part to state administrative procedures and outreach efforts. Some states, for example, use one-page application forms and allow applicants to submit their forms by mail. Such simplified procedures are particularly important for working poor families unable to take time off from their jobs to apply in person and to families in rural areas or other communities where a lack of public transportation makes it difficult for families to come to the Medicaid office. In some communities, child care agencies, schools and health care providers, such as visiting nurses, community health centers, and hospitals help to enroll eligible families onto the program. In addition, some states have taken advantage of opportunities to improve participation rates by linking Medicaid eligibility determinations to other programs with similar eligibility rules, such as the WIC program, Head Start, and other child care programs.

   

  More Eligible Children Could Be Uninsured In the Future

  Provisions in the new welfare law coupled with low and declining rates of employer-provided health care coverage for children could mean even greater numbers of Medicaid-eligible children not participating in the program in the future. A large portion of these children will likely be wholly uninsured.

  New Welfare Law Could Affect Medicaid Participation

  Although it is commonly believed that the welfare law enacted in August 1996 did not include any significant changes in the Medicaid program, the new law does affect Medicaid eligibility and participation in fundamental ways. These changes could result in greater numbers of children who are eligible for Medicaid but not enrolled in the program.

  Since the beginning of the Medicaid program, eligibility for AFDC and Medicaid have been linked. Families receiving AFDC have been automatically eligible for Medicaid and enrolled in the Medicaid program. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, however, replaced the AFDC program with the Temporary Assistance to Needy Families ("TANF") block grant. Under the block grant, states have broad flexibility to design income support and work programs for low-income families with children and are required to impose federally-mandated restrictions, such as time limits, on federally-funded assistance. The law does assure, however, that children and parents who would have qualified for Medicaid based on their eligibility for AFDC continue to be eligible for Medicaid regardless of whether they qualify for assistance under a program or programs that states establish with block grant funds. This is accomplished by carrying over to the Medicaid program certain eligibility rules from state AFDC programs.⁽¹¹⁾

  Continued Phase-In of Medicaid Coverage for Poor Children Will Increase the Number of Children Eligible for Medicaid and the Need for Outreach In addition to the changes in the new welfare law, the continued phase-in of the recent Medicaid expansions means that large numbers of additional children will become eligible for Medicaid in the future. Under federal law, children under age six below 133 percent of the poverty line and poor children ages six and older born after September 30, 1983 are eligible for Medicaid. As a result, in 1994 poor children ages six through 11 were eligible for Medicaid while currently poor children ages six through 13 are eligible. By 2002, poor children under the age of 19 will be eligible for Medicaid. In 1994, there were nearly 2.4 million poor children over the age of 11 who did not receive Medicaid, a rough estimate of the number of additional children who will become eligible and could be enrolled in Medicaid in the coming years.

  While children will not lose eligibility for Medicaid due to the new law, other changes in the law may cause Medicaid participation rates to drop substantially.

  Fewer children are likely to receive cash assistance under the new law due to restrictions placed on receipt of aid. States are required to impose a maximum five-year time limit on assistance funded with federal block grant dollars and are permitted to impose shorter time limits. States are also given vast new authority to limit access to assistance in other ways, such as by lowering income-eligibility limits and by limiting aid to teen parents.

  Children who no longer receive cash assistance due to such restrictions generally will be eligible for Medicaid, but they are likely to have low Medicaid participation rates. As noted above, close to two-thirds of the children eligible for Medicaid who did not receive cash assistance — 62 percent — were not enrolled in the program in 1994.

  Medicaid participation may decline even among children who remain eligible for cash assistance and work programs funded under the block grant. Under the new law, there is no requirement that states automatically enroll children who receive aid funded under the TANF block grant in the Medicaid program. States have a number of options, however, under the law that allow them to keep Medicaid and welfare program rules aligned and to assure that children who receive cash aid and who are eligible for Medicaid are enrolled in the Medicaid program. (See text box below.)

  Fewer children may also qualify for cash assistance because their parents find jobs. The new law requires states to place increasing numbers of parents in work activities, and the law is expected to result in greater number of parents finding employment. While many of the children whose parents become employed are likely to remain eligible for Medicaid due to the low earnings of their parents, Medicaid participation rates among children in poor and near-poor working families are quite low.

  In addition to these welfare-related changes, the new law makes significant changes in eligibility for children under the federal Supplemental Security Income (SSI) program. Under the law, a substantial number of children will lose SSI benefits — and, therefore, their automatic eligibility for Medicaid — due to new restrictions in the definition of disability. A majority of the children who are no longer eligible for SSI will be eligible for Medicaid under alternative avenues of coverage — many, for example, will meet the age and income eligibility criteria for Medicaid — but enrollment of these poor children who have significant medical problems will no longer be automatic.⁽¹²⁾

  The extent to which states develop new approaches to assure that eligible children are enrolled in Medicaid thus will have a considerable effect on Medicaid participation rates both among children who remain eligible for cash assistance and those who no longer qualify.⁽¹³⁾

  States Can Coordinate Medicaid and Welfare Program Enrollment Although the new law does not require states to enroll all children who receive cash assistance under the TANF block grant into the Medicaid program, states could design their welfare and Medicaid systems so there is a single eligibility determination for both programs. The new law allows states flexibility in determining how they will administer their Medicaid program and the extent to which Medicaid rules and the rules for the program(s) funded with TANF block grant dollars will be the same. The more closely the eligibility rules for the welfare and Medicaid programs are aligned, the easier it will be to coordinate program enrollment. For example, if a state keeps the basic financial eligibility rules for its new welfare program and for Medicaid consistent, a single application form can be used to determine eligibility under both programs and a single agency could make the eligibility determination. Coordination also can be achieved even in states that choose to change their welfare rules as long as the new rules are no more restrictive than the rules that were in effect in July 1996. The new welfare law maintains current rules as the minimum standard for Medicaid; states can modify and simplify their rules so long as the changes do not result in families losing coverage under the Medicaid program. a Even if a state imposes restrictions or lowers eligibility standards for its TANF-funded program in ways that would not be allowed under Medicaid rules, a single application could still be used for the two programs since all TANF program recipients would likely still be eligible for Medicaid. The state could maximize participation in Medicaid (and limit state administrative costs) by coordinating eligibility between the two programs. The state would, however, have to ensure that children and parents who did not qualify for TANF-funded assistance are separately evaluated for Medicaid eligibility. _______________ a States that keep welfare and Medicaid rules consistent may be able to minimize their state administrative costs and maximize their federal reimbursement. States can claim federal Medicaid administrative matching funds to cover the cost of determining eligibility under Medicaid, whereas under the TANF block grant, states do not receive additional federal funds for administration. If the eligibility process for the two programs remains closely linked, the work done on Medicaid could significantly simplify the administrative tasks required to determine eligibility for aid under TANF.

   

  Declines in Employer-Based Health Care Coverage

  The number of low-income parents who work may increase as a result of changes in welfare programs and policies. However, few of the children in these families are likely to be covered in an employer-sponsored health plan.

• In April 1993, when the minimum wage stood at $4.25, only 21 percent of workers between the ages of 25 and 34 who earned less than $5 an hour were covered by an employer-provided health insurance plan.

  Similarly, among all workers earning less than $5 an hour, only 13 percent had employer-provided health care coverage for both themselves and their families. Among those earning between $5 and $7.50 an hour, only 26 percent had employer-provided coverage for both themselves and their families.

  Some low-wage workers who are not covered by an employer-based health care plan are covered by other private health insurance plans, including employer-based plans of other family members. Among those earning less than $5 an hour in private sector firms, however, nearly 60 percent worked in firms that did not offer any of their employees health insurance coverage. Among those that worked in firms that offered health insurance coverage to at least some of their workers, almost one-third reported being ineligible for coverage. The most common reason cited for ineligibility was that the employee worked part time.⁽¹⁴⁾

  Census figures show that in 1995, only about two-thirds of children under age 18 — 66.4 percent — had private health insurance coverage, down from about three quarters — 73.8 percent — in 1988.

   

  Conclusion

  Already, large numbers of eligible children are not enrolled in the Medicaid program, and many of those eligible but not enrolled lack any form of health insurance. Changes in the new welfare law coupled with low and declining rates of health insurance coverage through the workplace could mean that more Medicaid-eligible children will lack adequate health care coverage in the future. It is, therefore, more important than ever for states to improve their efforts to inform low-income families of their potential eligibility for Medicaid and to reexamine their systems for enrolling children and families in the Medicaid program.

  Table I: Children Under 11 Who Are Income-Eligible For Medicaid But Not Enrolled
  		Percent			Number
  State		Low	High		Low	High
  Alabama		30.9%	53.7%		56,600	153,200
  Alaska		19.6%	43.3%		2,900	10,700
  Arizona		32.8%	53.6%		68,000	166,900
  Arkansas		32.0%	54.5%		33,600	89,400
  California		31.7%	39.2%		620,200	893,300
  Colorado		24.3%	54.3%		19,500	81,300
  Connecticut		17.3%	46.6%		14,800	75,200
  Delaware		23.8%	55.1%		3,700	16,500
  Dist. of Col.		9.7%	27.0%		3,600	15,500
  Florida		28.6%	38.9%		199,500	336,200
  Georgia		24.9%	49.7%		52,300	173,500
  Hawaii		27.7%	56.0%		9,400	33,000
  Idaho		32.0%	52.6%		15,100	37,800
  Illinois		22.0%	33.2%		117,700	227,300
  Indiana		19.0%	42.4%		37,600	140,700
  Iowa		36.1%	63.0%		29,800	88,000
  Kansas		25.2%	49.7%		19,600	64,500
  Kentucky		18.0%	37.7%		29,100	96,400
  Louisiana		23.9%	42.6%		65,800	173,600
  Maine		23.0%	50.1%		8,000	30,600
  Maryland		28.1%	54.6%		41,600	141,000
  Massachusetts		24.8%	40.0%		39,300	87,400
  Michigan		18.7%	29.4%		80,200	160,500
  Minnesota		17.1%	42.9%		20,000	89,800
  Mississippi		20.8%	38.4%		31,100	83,900
  Missouri		26.6%	51.4%		49,500	159,800
  Montana		18.4%	41.5%		5,500	20,000
  Nebraska		28.2%	54.8%		12,000	40,000
  Nevada		46.2%	70.5%		21,100	52,900
  New Hampshire		15.2%	49.3%		3,500	23,300
  New Jersey		28.1%	43.7%		56,400	121,300
  New Mexico		26.4%	45.7%		26,000	64,800
  New York		24.5%	32.8%		218,700	350,200
  North Carolina		25.8%	37.8%		69,600	131,100
  North Dakota		18.6%	44.8%		2,800	11,900
  Ohio		23.1%	34.9%		100,600	197,000
  Oklahoma		38.3%	60.7%		55,500	136,600
  Oregon		21.4%	47.3%		20,200	77,400
  Pennsylvania		27.9%	41.1%		117,500	226,900
  Rhode Island		22.0%	51.3%		5,400	23,900
  South Carolina		22.7%	40.5%		42,100	109,400
  South Dakota		36.0%	58.1%		9,800	24,300
  Tennessee		17.8%	37.3%		35,500	116,900
  Texas		33.7%	43.9%		361,600	577,700
  Utah		35.2%	60.5%		19,800	56,400
  Vermont		6.6%	31.0%		900	8,300
  Virginia		37.8%	64.1%		56,800	163,800
  Washington		18.7%	42.6%		29,400	112,100
  West Virginia		12.7%	32.5%		9,400	38,400
  Wisconsin		21.7%	46.8%		30,200	109,400
  Wyoming		26.5%	58.2%		3,300	13,800
  U.S.		32.4%	38.5%		4,450,600	5,147,000
  How To Read This Table: In the period 1992-1995, between 31 and 54 percent of children income-eligible for Medicaid were not enrolled in Alabama. This translates into between 57,000 and 153,000 children who were eligible but not enrolled in Medicaid in 1994. Source: Center on Budget and Policy Priorities calculations based on pooled data from the Census Bureau's 1993, 1994, 1995 and 1996 March Current Population Surveys.
  Table I Notes: 1. Except for children interviewed in 1996, children were considered income eligible for Medicaid if they met the age and income-eligibility requirements for Medicaid in the year prior to the year in which they were interviewed for the Current Population Survey. In each year, children under age six with incomes below 133 percent of poverty were considered income-eligible for Medicaid. Those interviewed in 1993 about their income and health insurance in 1992 were considered income-eligible for Medicaid if they were between the ages of 6 and 8 and had incomes below the poverty line. Those interviewed in 1994 were considered income-eligible for Medicaid if they were between the ages of 6 and 9 and had incomes below the poverty line. Those interviewed in 1995 were considered income-eligible for Medicaid if they were between the ages of 6 and 10 and had incomes below the poverty line. For those interviewed in 1996 about their health care coverage in 1995, only those children who met the 1994 Medicaid eligibility rules — i.e. poor children between the ages of 6 and 10 — were considered. 2. For detailed description of the methodology used, see Appendix II.