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About the Series
Assessing the New Federalism is a multi-year Urban Institute project designed to analyze the devolution of responsibility from the federal government to the states for health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, Inc., the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.
Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site. This paper is one in a series of occasional papers analyzing the information from these and other sources.
Executive Summary
Background
The recent decline in Medicaid caseloads reported by many states implies that a large proportion of families leaving welfare are not continuing to qualify for Medicaid. This is not what policymakers expected, since Medicaid has several means by which a family can maintain eligibility after welfare, including transitional coverage for persons going to work, poverty-related coverage for children, and medically needy programs. In addition, the continued phase-in of poverty-related expansions for children was expected to help offset welfare declines.
There has long been concern, however, that these nonwelfare routes to Medicaid eligibility do not work well. Several researchers have reported low participation rates among persons qualifying for Medicaid through the various eligibility provisions not tied to welfare.
Study Objectives
This study used Medicaid administrative data to see how declines in welfare enrollment in California and Florida during 1995 affected Medicaid. During that time, both states used waivers to reform their welfare programs, and both experienced declines in their welfare caseloads. We followed persons leaving Aid to Families with Dependent Children (AFDC) to see if they stayed on Medicaid and what eligibility provisions they used to maintain coverage. We also analyzed the overall Medicaid enrollment patterns of these states in 1995 to better understand how enrollment changed, with particular attention to what happened with the poverty-related child coverage. Finally, we examined the level of turnover in each state's Medicaid caseload during 1995. Medicaid managed care program administrators have complained about turnover among the Medicaid population.
Thus, the study was designed to fill several gaps in our understanding of Medicaid enrollment patterns. Even though the study period predates the federal welfare reform initiative, both states, at least through 1998, continued to operate their Medicaid eligibility systems in much the same manner as in 1995.
Data Source and Study Design
The study uses data from the Health Care Financing Administration's (HCFA) State Medicaid Research Files (SMRF) for 1995. The person-based SMRF files include detailed monthly data on the eligibility status of all Medicaid enrollees, enabling us to track when individuals were on and off Medicaid. The files also include information on the use of specific eligibility groups, such as transitional assistance and child poverty-related coverage. We did a special cohort analysis of persons leaving AFDC, tracking their Medicaid status for six months after AFDC exit.
Findings
In both California and Florida in 1995, about half the children leaving AFDC left Medicaid as well. We found this same pattern with adults in California, while in Florida two-thirds of the adults exiting AFDC lost their Medicaid eligibility. Transitional assistance, which covers up to 12 months of Medicaid for persons leaving welfare because of increased earnings, was used by only 6 percent of the adults in California six months after AFDC exit, compared with 9 percent in Florida. However, California made greater use of its medically needy provisions to provide continued Medicaid coverage to both children and adults than did Florida. This is not surprising, because California's medically needy income level was one-third higher than its AFDC level, while Florida's medically needy income level was set at the same level as AFDC. Florida made greater use of the poverty-related provisions for children exiting AFDC than did California. To some extent, the eligibility groups used were arbitrary, since individual family members often qualified for continued Medicaid under multiple provisions. More importantly, at least half the children and adults leaving AFDC in both states did not stay on Medicaid.
From one-quarter to one-third of the Medicaid caseloads in each state turned over during the year, and 7 to 10 percent of the enrollees had interruptions in their Medicaid enrollment during the year (usually referred to as churning). Caseload turnover and churning are appropriate when children and their parents leave Medicaid because they no longer qualify. However, they are not appropriate if families who remain eligible become uninsured. Between the two states, 1.1 million children were enrolled in Medicaid at some point during 1995 but were not enrolled at year end. Given the persistence in the rates of uninsured children in both states, it seems plausible that many of these children did not move to private insurance coverage.
Finally, the 1995 growth in the number of children covered under the poverty-related provision was due to the transfer of enrollees from AFDC cash and other eligibility groups. Contrary to expectations, the poverty-related groups were not bringing lots of "new" children into Medicaid.
By the end of 1995, the number of AFDC recipients had dropped by 2 percent in California and 11 percent in Florida. These losses in AFDC contributed to year-end Medicaid enrollment declines of 2 percent and 4 percent, respectively.
Conclusions
The study results suggest that declines in welfare caseloads lead to declines in Medicaid enrollment. Indeed, in both states, Medicaid declines continue to go hand-in-hand with drops in the welfare caseload. From January 1996 to January 1998, California's average monthly Medicaid enrollment was down 11 percent, while Florida's was down 12 percent. Outreach efforts related to the Children's Health Insurance Program may eventually help stimulate greater use of Medicaid's poverty-related provisions for children, but states should consider other actions as well. Medicaid programs need to examine their administrative practices to ensure that qualified persons leaving AFDC remain enrolled in Medicaid. Among families leaving welfare for work, many more should remain enrolled in Medicaid under the transitional coverage provisions. These results also suggest that the level of turnover in Medicaid caseloads is a problem and that states should improve their efforts to keep eligibles enrolled. Some of the current emphasis on outreach may need to be refocused to ensure that children (and their parents) remain in the program as long as they are eligible. States should also seriously consider guaranteeing child enrollment for 12 months. Without steps like these, state Medicaid programs may be inadvertently contributing to the lack of insurance among low-income children and adults.
Note: This report is available in its entirety in the Portable Document Format (PDF).
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