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POLICY INSIGHT
BEYOND THE NUMBERS

Economic Legislation Should Include Key Measures for People With Disabilities

As policymakers craft an economic package for enactment this year, they should include policy proposals for people with disabilities that would allow many more disabled people to access affordable health coverage and live safely in their homes and communities, and would better reward work and reduce hardship.

The COVID-19 pandemic highlighted key gaps in public policies that predated the crisis and will persist if left unaddressed; the millions of people affected by those gaps include large numbers of people with disabilities. For example, hundreds of thousands of people with disabilities fall into the Medicaid coverage gap, lacking any pathway to health insurance coverage because they live in one of 12 states that failed to adopt the Affordable Care Act’s Medicaid expansion. More disabled people still are on waiting lists to access the Medicaid services and supports that would allow them to live outside of nursing homes. And some 480,000 disabled workers aged 19 to 65 without children are taxed into, or deeper into, poverty largely because of the meager Earned Income Tax Credit (EITC) for workers without children. Policymakers can use new economic legislation to ease these hardships.

Close the Medicaid coverage gap. Medicaid expansion provides an important pathway to health insurance coverage for people with disabilities. Nearly a quarter of non-elderly adult Medicaid enrollees had a disability, and most of them did not qualify for Medicaid through a disability pathway such as receipt of Supplemental Security Income. That’s because many people with a disability don’t meet strict state or federal standards for disability. Instead, most Medicaid enrollees with disabilities are eligible based on their income; for many this eligibility depends on their state’s Medicaid expansion decision. We estimate that approximately 324,000 uninsured adults in the coverage gap had disabilities in 2019, or roughly 15 percent of the total coverage gap population. Given some states’ refusal to adopt the Medicaid expansion, federal action is essential.

Increase access to Medicaid home- and community-based services (HCBS). Forthcoming economic legislation should boost services to allow more disabled people to live in the community rather than in institutional care. This would reduce the costs of long-term care for families, one of President Biden’s priorities for economic legislation.

The pandemic has taken a heavy toll on people living and working in nursing homes: some 150,000 residents and 2,000 staff have succumbed to COVID-19. While vaccines have helped address the immediate crisis for people in these settings, the past two years have brought renewed attention to the benefits of providing services in the community instead of in institutions (such as reducing social isolation), the associated cost savings, and the opportunities for Medicaid to better respond to growing demand. But hundreds of thousands of people with disabilities languish on waiting lists for the services they need to live in the community.

Nursing home care is a mandatory Medicaid benefit, but HCBS — which help seniors and people with disabilities get help with activities like getting dressed, bathing, and preparing meals so they can live in the community — are optional. Nationally, more than half of spending on Medicaid long-term services and supports (LTSS) is on HCBS rather than nursing homes, but the share varies widely by state. In 2018, five states spent more than 75 percent of Medicaid LTSS on HCBS, while six states spent less than 40 percent.

Congress should provide financial incentives to states to increase the proportion of LTSS spending for care in home- and community-based settings, where most people prefer to receive care and where care typically costs much less than in institutions. Doing so would result in growth in the direct service provider workforce, higher wages for direct service providers, increased payments for family caregivers, and increased availability of HCBS for people who would otherwise live in an institution.

Expand the EITC for working adults not raising children at home. Expanding the EITC for working adults not raising children at home, which President Biden embraced in his 2023 budget, would allow many more disabled workers to benefit from the EITC’s success at rewarding work and boosting incomes.

The EITC is a powerful wage subsidy for workers with children, but the credit for working adults not raising children at home is available only to workers aged 25 to 64 with extremely low incomes and provides only a tiny credit to the small number who qualify. Largely as a result, the federal tax code taxes nearly 5.8 million people aged 19 to 65 into, or deeper into, poverty — the lone group for whom that happens — including roughly 480,000 workers with disabilities.

People with disabilities are likelier than people without disabilities to work in low-paid occupations, to work part time when they work, and to experience poverty. Improving the EITC, therefore, is particularly important to people with disabilities who are paid low wages and aren’t raising dependent children.

The EITC expansion in the 2021 American Rescue Plan benefited about 1.7 million workers with disabilities who aren’t raising children at home. The provision temporarily raised both the maximum EITC for workers without children (from roughly $540 to roughly $1,500) and the income cap for them to qualify (from about $16,000 to more than $21,000 for unmarried filers and from about $22,000 to more than $27,000 for married couples). It also expanded the age range of eligible workers without children to include younger adults aged 19-24 (excluding students under 24 attending school at least part time) as well as people aged 65 and over. Forthcoming economic legislation should include an expanded EITC for these workers, including those with disabilities.

Policymakers have an opportunity with new legislation to improve the health and economic well-being of disabled people, and they should act swiftly on it.