Emergency Health Coverage for the Unemployed and Uninsured in Response to the Pandemic and Economic Crisis

A pharmacist wearing personal protective equipment works in the Elmhurst neighborhood of New York City in April 2020.

Nearly 38 million Americans have filed claims for unemployment insurance, and many more live in households in which someone has lost a job. As a result, nearly 27 million people could lose their employer coverage and become uninsured. Among this group, about half could be eligible for Medicaid, and several million more would be eligible for subsidies under the Affordable Care Act (ACA). However, major gaps in coverage and affordability would remain. If the unemployment rate reaches 20 percent, Oliver Wyman estimates that the number of uninsured will increase by about 9 million people.

To respond to this crisis and help as many people as quickly as possible, this column proposes emergency health coverage for the unemployed and uninsured. This emergency health coverage would build on one of the most popular parts of the ACA—its Medicaid expansion—by automatically enrolling the unemployed into Medicaid. In doing so, it would guarantee immediate coverage for all of the unemployed.

By leveraging the existing Medicaid infrastructure and program rules, it is possible to rapidly enroll the unemployed in coverage in 2020 and 2021. Such a proposal could be paired with reforms that enhance premium and cost-sharing subsidies for higher-income enrollees in ACA coverage—and that could be implemented relatively quickly—in 2021. And after 2021, this proposal could form the building blocks for broader reforms that expand public coverage further and streamline the system.

Additionally, by expanding Medicaid, this proposal is cost-effective, with the lowest possible cost per enrollee and the most comprehensive coverage. The Center for American Progress estimates that under the plan, 23 million people would receive comprehensive coverage in 2021 at a cost of only $90 billion. Simply put, this proposal meets the scale and urgency of the current crisis.

Gaps in health coverage

The pandemic and economic crisis have exposed major gaps in health coverage. Individuals who lose their jobs and employer coverage could fall through four cracks:

  1. In states that did not expand Medicaid, families could fall into the “coverage gap.” In these states, income eligibility for Medicaid typically ends below 50 percent of the federal poverty level, but income eligibility for ACA subsidies does not begin until 100 percent of the federal poverty level. The Kaiser Family Foundation estimates that 9 million people will fall into the coverage gap by January 2021.
  2. Families could have incomes above 400 percent of the federal poverty level in 2020, making them ineligible for ACA subsidies. Because income eligibility is determined on a calendar-year basis and unemployment insurance benefits count as income, unemployed individuals could have incomes above 400 percent of the poverty level even if they have no current wages. The Kaiser Family Foundation estimates that 7 million people will be ineligible for subsidies due to the way income is counted.
  3. Families could be eligible for Medicaid or ACA subsidies but not know of their eligibility, or the process of enrollment could pose a barrier. Before the pandemic, millions of people were eligible for subsidies but not enrolled in coverage. The lack of seamless enrollment will be an acute problem during the current crisis.
  4. The ACA made historic progress in improving the affordability of health coverage. But for many families, premiums and cost-sharing remain unaffordable. In 2018, 42 percent of adults who shopped for or had ACA coverage reported that it was “difficult or impossible” to find affordable coverage.

To fill these gaps immediately in 2020 and 2021, a simple coverage expansion is necessary—a Medicaid expansion for the unemployed that includes a federal Medicaid option in states that opt out of the Medicaid expansion.

Medicaid expansion for the unemployed

Under the Affordable Care Act, states have the option to expand Medicaid to families with incomes up to 138 percent of the federal poverty level. To rapidly absorb the unemployed into affordable coverage, states should have the option to further expand Medicaid to two categories of enrollees: 1) individuals who are receiving unemployment insurance benefits or who were receiving unemployment insurance benefits that expired during the public health emergency; and 2) families with incomes up to 200 percent of the federal poverty level. As under the current Medicaid program, eligible individuals who are enrolled in ACA coverage or employer coverage would be able to switch to Medicaid.

For the first eligibility category, states would automatically enroll in Medicaid all individuals who receive unemployment insurance benefits or food stamps—under the Supplemental Nutrition Assistance Program (SNAP)—regardless of their income. This auto-enrollment would be similar to the current “Express Lane Eligibility” option, in which several states enroll children in Medicaid or the Children’s Health Insurance Program (CHIP) based on their SNAP eligibility.

States would guarantee continuous eligibility for these enrollees until the end of the public health emergency, at which point their eligibility would be redetermined. If they are no longer receiving unemployment insurance benefits, they would qualify for Medicaid under the second eligibility category.

For the second eligibility category, states would disregard unemployment insurance benefits in determining income eligibility. They would also be required to use “presumptive eligibility”—in which medical providers determine temporary eligibility—to allow immediate access to care. Since Medicaid uses current monthly income to determine eligibility, many individuals who are unemployed would qualify for Medicaid under this category as well.

Premiums and cost-sharing for expansion populations would be eliminated. States would be required to cover U.S. Food and Drug Administration (FDA)-approved testing, therapeutics, treatment, and immunization for the coronavirus, with no cost-sharing.

States would receive 100 percent federal funding—through the federal matching assistance percentage (FMAP)—for both the regular Medicaid expansion and the Medicaid expansion for the unemployed. In other words, states would not bear any costs and would have no reason not to take up both options. Since the ACA’s FMAP for regular Medicaid expansion is currently 90 percent, a boost to 100 percent would provide much-needed fiscal relief.

Moreover, Medicaid is more cost-effective than private insurance, so the net cost of covering the unemployed would be minimized. As under the current Medicaid program, states would determine payment rates for providers, up to the federal upper payment limit (UPL), which is generally the cost of Medicare.

An important justification for this proposal is that it recognizes the urgency of the crisis. Once a state decides to expand Medicaid, enrollment could begin in a matter of weeks and grow to hundreds of thousands of people within months. No other mechanism can enroll so many people so quickly.

There is precedent for such a Medicaid expansion during a public health emergency. In response to the water crisis in Flint, Michigan, the Obama administration approved a waiver under Section 1115 of the Social Security Act for a five-year Medicaid expansion. This waiver expanded coverage to pregnant women and children with incomes up to 400 percent of the federal poverty level and allowed those with incomes above that level to buy into the program.

Federal Medicaid option

Under the Families First Coronavirus Response Act, the Paycheck Protection Program and Health Care Enhancement Act, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Health Resources and Services Administration reimburses medical providers for COVID-19 testing as well as treatment for the uninsured. This program applies to individuals in the United States who do not have another source of health coverage. Providers are reimbursed at Medicare rates and agree not to “balance bill” patients for costs above those rates. Although this program reimburses for important services, it does not reimburse for full health care services for the uninsured.

To close this gap in coverage, the federal government should offer a Medicaid option in states that opt out of the Medicaid expansion for the unemployed. This option would mimic the Medicaid expansion for the unemployed in eligibility, benefits, premiums, and cost-sharing. Medical providers that participate in Medicare should also participate in this program and would automatically enroll uninsured individuals in this option.

Coverage and federal cost estimates

The federal cost of the Medicaid expansion for the unemployed—including the federal Medicaid option in states that opt out—can be determined by estimating the cost of each new eligibility category: 1) individuals who are unemployed; and 2) families with incomes up to 200 percent of the federal poverty level.

For the first category, a key input is the number of people who become unemployed and lose employer coverage. Of those who lose employer coverage, an estimated 6.2 million people will gain ACA coverage and 7.3 million will become uninsured—13.6 million people in total. Under the proposal, all 13.6 million people would be automatically enrolled in Medicaid.

According to the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary, the per-enrollee cost of Medicaid in 2017 was $3,836 for children and $5,669 for adults. After accounting for inflation—using CMS growth projections—as well as average family size, the average cost per family member in 2021 would be $5,630. Multiplying this per-person cost by 13.6 million people yields a total cost of $76.4 billion for this eligibility category in 2021.

For the second category, a key input is the number of previously uninsured with incomes below 200 percent of the federal poverty level. Using Kaiser Family Foundation data on the distribution of the uninsured by income and Medicaid eligibility rules, 9.9 million people in this income group would qualify for Medicaid under the proposal. Assuming there is the same take-up rate as under the current ACA’s Medicaid expansion, 7.2 million people would enroll in Medicaid under this eligibility category.

According to CMS, the per-enrollee cost of Medicaid for adults, inflated to 2021, is $6,311; children in this income group already qualify for CHIP. Multiplying this per-enrollee cost by 7.2 million people yields a total cost of $45.5 billion for this eligibility category in 2021.

A third group of people might qualify for Medicaid under either eligibility category: those who were previously employed, but uninsured, with incomes above 200 percent of the federal poverty level before loss of employment. Using Kaiser Family Foundation data on the distribution of the uninsured by income and assuming an unemployment rate of 20 percent, 2.1 million people would qualify for Medicaid under the proposal. Multiplying this number by the per-person cost yields a total cost of $11.6 billion for this group in 2021.

Adding together the cost of each group, the total gross cost of the proposal is $133.5 billion in 2021. However, since Medicaid has a lower per-enrollee cost than ACA coverage, allowing 6.2 million people to shift from ACA coverage to Medicaid would result in significant savings—even as they receive more comprehensive coverage. The Congressional Budget Office estimates that ACA coverage costs $7,024 per enrollee. Multiplying this per-enrollee cost by 6.2 million people yields a total cost of $43.8 billion that would have been spent on this population under current law. And subtracting this amount from the $133.5 billion gross cost yields a net cost of $89.8 billion under the proposal in 2021.

This estimate assumes that state and federal governments use payment rates for medical providers that are equal to current Medicaid payment rates. A sensitivity analysis that estimates a high-cost scenario assumes that state and federal governments will use payment rates that are equal to current Medicare payment rates. The ratio of Medicaid rates to Medicare rates is 1.06 for hospital payments, 0.72 for physician payments, and 0.59 for drug payments. Using CMS data on the distribution of spending to calculate a weighted average, Medicare payments are 1.13 times as costly as Medicaid payments. Multiplying this ratio by the $89.8 billion cost of the base scenario yields a cost of $101.4 billion under this high-cost scenario in 2021.

Adding together enrollment for each group, a total of 22.8 million people would receive comprehensive coverage under the proposal.

Conclusion

A Medicaid expansion for the unemployed would provide a seamless, automatic, and immediate transition from coverage loss to affordable coverage, with no cracks in the safety net. And in states that opt out of the Medicaid expansion, a federal Medicaid option should be available. This strategy would guarantee immediate coverage for all of the unemployed in 2020 and 2021 at a fraction of the cost of any other proposal to cover the same number of people with comparable coverage.

Topher Spiro is the vice president for Health Policy and a senior fellow for Economic Policy at the Center for American Progress.

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