The Obama Budget Could Hurt Young People

by Allan Joseph

The big news in Washington last week was the Obama Administration’s unveiling of its proposed budget. As Sarah Kliff of Wonkblog details, one of the Administration’s unexpected proposals was to delay a series of cuts to Medicaid known as the Disproportionate Share (DSH) payments. These are, in essence, payments from the federal government to hospitals around the country to help them recoup the costs of providing care to uninsured patients, most of whom are poor. Part of the Affordable Care Act (ACA) was a cut to DSH payments because poor and uninsured Americans would be able to get insurance coverage through a greatly-expanded Medicaid program.

When the Supreme Court gave states the flexibility to opt out of the Medicaid expansion, it didn’t reverse the DSH cuts for those states — so now, many states deciding whether to expand Medicaid have been facing intense lobbying from hospital groups who fear they will lose DSH payments without receiving payment from newly insured patients. That lobbying has been powerful — for example, Ohio Governor John Kasich, a vocal opponent of the ACA, cited hospital payment concerns as one of the major reasons he supported the Medicaid expansion. Thus, the DSH cuts have been one of the Administration’s chief levers for pressuring states to expand Medicaid.

Now, the White House appears to be relenting on the DSH cuts; the delay is only for a year, but could signal the Administration’s willingness to continue DSH payments indefinitely, especially if a large number of states decline the Medicaid expansion. If that’s the case, then young people will be among those hit hardest by that decision. That sounds counterintuitive, but it’s true: without the cuts, states that weren’t planning on expanding their stingy Medicaid programs have little incentive to do so.

For a full primer on Medicaid, check out this piece from Mike Miesen, but here’s a quick summary: Medicaid varies from state to state, but in most states does not cover childless adults. Of those states without coverage for childless adults, 12 plan to decline the Medicaid expansion, which was slated to cover all adults up to 133% of the poverty line. According to the Commonwealth Fund’s analysis, nearly 5 million young adults ages 19-29 across the nation (approximately 11% of all 19-29-year-olds) are currently uninsured and have incomes under 133% of the poverty line (which translates to $15,282 for a single person and $35,325 for a family of four), while 40% of young adults ages 19-29 lack health insurance, as demonstrated in the chart below. The federal government says young adults are the largest uninsured group in America. Yet a dozen states aren’t going to expand Medicaid coverage that would greatly benefit those poor young adults — and without the specter of DSH cuts, it’s hard to see what could force them to do so.

It’s not that the ACA isn’t designed to help young people get insurance. One of its most well-known provisions allows young adults to stay on their parents’ insurance till they turn 26, a feature of the bill that has already benefited nearly 7 million young adults who would otherwise not have had insurance, according to the Commonwealth Fund. And there’s a pretty good reason the White House is willing to keep the cuts, since without them, hospitals in states without expanded Medicaid will see a serious financial burden — from the very inception of the ACA, the federal government has tried to give states flexibility. Yet hundreds of thousands of poor young adults will be left without health insurance coverage if states don’t expand Medicaid, and right now, it looks like the Obama Administration is willing to give up one of its best tools for making that expansion happen — and will thus leave a big gap in its goal of providing health insurance for all.

Note: States whose governors are declining expansion and don’t provide Medicaid or other health benefits to childless adults: Alabama, Georgia, Idaho, Louisiana, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas

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Allan Joseph is a senior at the University of Notre Dame studying economics and pre-medical studies. You can follow him on Twitter @allanmjoseph.

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