Income volatility and the design of insurance exchanges

If you read one piece of health policy wonkery today, you should read this article by Benjamin Sommers and Sara Rosenbaum. Rosenbaum is a familiar national voice in Medicaid and health reform. You may not know Sommers as well, but you will. He is a health services researcher who has done great work on CHIP transitions and takeup (e.g. here).

Their article goes public about a technical but important, issue that’s been kicking around below the public’s radar screen in the health policy community. How do we serve people whose incomes vary over the year? You may be snoozing already, but if you stay awake for a moment, you’ll see why this is both important and complicated to address. And why health reform needs some Midrash that has yet to be written.

Suppose that you are a single mom who earns about $30,000 per year. Maybe you are a waitress. Maybe you work in a retail outlet and are given fluctuating hours by your employer. On average, you earn about $2,500 per month. Only you don’t earn that every month. You earn a lot around the holidays and during peak vacation periods. You don’t earn much in other months when hours are scarce or tips are fewer.

Based on your monthly income, you are sometimes eligible for Medicaid, and you sometimes earn more than that and belong on a health insurance exchange. Depending how these issues are handled, you could be placed into one of these arrangements or the other. Worst of all, you could churn back and forth as your personal circumstances push you above or below the line for Medicaid eligibility. Such income volatility poses administrative challenges for the people insuring you. This may also disrupt your healthcare if Medicaid and your plan within the health insurance exchange have different provider networks or different policies regarding your care.

Sommers and Rosenbaum use longitudinal data from the Survey on Income and Program Participation (SIPP) to examine how common such volatility really is. (I’m annoyed at myself that I didn’t write this paper, since my colleagues Luke Shaefer, Colleen Grogan, and I have used SIPP to examine somewhat related issues.

Sommers and Rosenbaum’s numerical findings speak for themselves.:

We estimate that within six months, more than 35 percent of all adults with family incomes below 200 percent of the federal poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within a year, 50 percent, or 28 million, will.

States need to account for this in their design health insurance exchanges, and to allow a more permeable boundary between the new exchanges and Medicaid. Sommers and Rosenbaum provide some pretty sensible policy suggestions. I’ll let you read their take and decide for yourself.

The Affordable Care Act is pretty silent about how these issues should be handled. For all the juvenile criticisms of passing a many-paged bill, a few-thousand pages provides only a basic structure and roadmap for health reform. Much of the hard work resides in the yet-to-be-written administrative and regulatory Midrash that goes along with it.

The federal government and the states had better be talking. 2014 is not so far away.