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Don’t Reverse Health Reform’s Provisions That Boost Work Incentives, Eliminating the Medicaid “Cliff”

Health reform was an essential step to reduce the type of work disincentives that House Republicans decried as they rolled out their new poverty plan.  That’s because health reform’s Medicaid expansion lets the working poor earn more and still retain health coverage.

Before health reform, Medicaid coverage for poor adults was extremely limited.  Non-disabled adults could get Medicaid only if they had extremely low incomes; the typical state cut off eligibility at 61 percent of the poverty line (about $12,300 for a family of three in 2016) for working parents and 37 percent of poverty ($7,460) for non-working parents.  That meant that parents with Medicaid could lose their health coverage if they worked more hours or took a higher-paying job. 

Health reform eliminated these eligibility “cliffs” by making Medicaid coverage available to all non-disabled, non-elderly adults with incomes up to 138 percent of poverty, and by providing subsidies to buy marketplace coverage for people with incomes above that threshold.  As the Congressional Budget Office concluded, “some people who would have been eligible for Medicaid under prior law — in particular, working parents with very low income — will work more as a result of the [health reform] provisions.” 

Unfortunately, harmful eligibility cliffs that can discourage work still exist in the 19 states that haven’t expanded Medicaid.  Nearly 3 million uninsured people in those states are in a coverage gap, with incomes too high for Medicaid but too low for marketplace subsidies.  And working parents with incomes low enough to qualify for Medicaid risk losing Medicaid coverage if they work more — and could end up uninsured. 

Proposals to address poverty and improve health care should encourage more states to take the Medicaid expansion, not repeal it.  If, as expected, the House Republicans’ forthcoming health plan nonetheless repeals health reform’s coverage provisions, including the Medicaid expansion, millions of the working poor will lose their health coverage and become uninsured and health reform’s progress on promoting work will be reversed.