Older Adults Benefit If Congress Closes the Medicaid Coverage Gap and Boosts Premium Tax Credits

The economic recovery legislation Congress is crafting presents a rare opportunity to dramatically reduce the number of uninsured people, including uninsured older adults. Congress should prioritize permanently closing the Medicaid coverage gap and permanently boosting premium tax credits in the Affordable Care Act (ACA) marketplaces, to extend coverage to people — including millions of older people — who otherwise have no coverage at all.

House committees have passed legislation that would permanently close the coverage gap and make permanent the premium tax credit improvements enacted in the American Rescue Plan. Enacting such changes would improve access to coverage and lower costs for many of the 3.6 million people aged 55 to 64 who are uninsured, while also helping people at every age.

As policymakers work toward a final package, they will have to make tough tradeoffs. Much of the discussion around helping older adults has focused on adding dental, hearing, and vision benefits to Medicare. Some seniors face challenges accessing these important services, and they need help. But some older adults lack health coverage altogether or would lose their coverage if the Rescue Plan premium tax credit improvements end. Recovery legislation must solidify and extend the gains that older people have experienced as a result of the ACA, through both the Medicaid expansion and the marketplaces.

The 2.2 million uninsured adults in the Medicaid coverage gap ― created by 12 states’ refusal to adopt the ACA Medicaid expansion ― have incomes below the poverty line, which is too low to qualify for subsidized health insurance in the ACA marketplaces, yet they don’t qualify for Medicaid under their states’ rules. Roughly 358,000 uninsured people aged 55-64 are in the coverage gap. (See table.)

The benefits of expanding Medicaid to older adults are striking. It’s associated with improved access to screenings and treatment for health conditions more prevalent in older adults, including increases in cancer screenings and early-stage cancer diagnoses, more prescriptions filled to treat heart disease and diabetes, and fewer people screening positive for depression. Moreover, Medicaid expansion prevents thousands of premature deaths each year: it saved the lives of at least 19,200 adults aged 55-64 from 2014 to 2017, a landmark study found. Conversely, 15,600 older adults died prematurely over the same period because their state chose not to expand Medicaid. Medicaid expansion reduces annual mortality rates for older adults gaining coverage by an estimated 39 to 64 percent.

The ACA’s health insurance marketplaces have been a critical source of coverage for older people, who rely on the individual market more than other age groups. That’s because many older adults who don’t have access to coverage through their job want health insurance ― 84 percent of people aged 55 to 64 have a pre-existing condition ― but find it unaffordable without the ACA’s help. Older people account for nearly 29 percent of marketplace enrollees, even though they are only roughly 13 percent of the total population. And adults 55 and older accounted for 22 percent of new HealthCare.gov enrollees in the six-month special enrollment period that ended August 15.

Because of the Rescue Plan’s expanded premium tax credits, 2 million current enrollees and 1.3 million uninsured people who are aged 55 to 64 and live in the 36 states that use HealthCare.gov are eligible for a marketplace plan with a monthly net premium of $50 or less or, for more than half of them, a $0 premium. Any eligible marketplace enrollee making $25,000 now pays $38 rather than the previous $132 per month in premiums (1.84 instead of 6.33 percent of income) for a benchmark silver plan.

In addition to increasing the premium tax credit amounts, the Rescue Plan also expands who is eligible for a premium tax credit in a way that significantly benefits older people, by allowing those with incomes above 400 percent of the poverty line ($52,000 for a single person) to receive a premium tax credit if their premiums exceed 8.5 percent of their income. Before the Rescue Plan, people with income above that threshold weren’t eligible for financial help and had to pay the full premium, even if they faced excessive premium burdens.

This “cliff” particularly affected older people, whose premiums are much higher as a share of income than younger people because the ACA allows insurers to charge older people higher “sticker price” premiums. In 2021, the average unsubsidized premium for marketplace coverage ranged from $787 to $1,058 per month for 55- to 64-year-olds, versus $353 to $428 for 21- to 34-year-olds.

Under the Rescue Plan and the House Ways and Means Committee proposal, no marketplace enrollees, irrespective of income, age, or state, would pay more than 8.5 percent of their income in premiums. For example:

• On average, a 64-year-old making $52,000, just above the prior subsidy cliff, now pays $368 instead of $1,061 per month in premiums (8.5 instead of 24 percent of income), saving more than $8,300 in 2021. In Oregon, that person used to pay $1,026 per month; in West Virginia, they paid $1,167.
• On average, a 60-year-old couple making $70,000 pays $496 rather than $1,920 per month (8.5 instead of 33 percent of income), saving more than $17,000 in 2021. In Arizona, that couple used to pay $1,852 per month; now they pay 73 percent less.

State-specific data are available at this link.