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Helping People with Lower Incomes Avoid the Medicare Cliff

The National Council on Aging (NCOA) and the LeadingAge LTSS (long-term services and supports) Center at the University of Massachusetts released a new report on the problems people may face when they lose eligibility for expansion Medicaid because they become eligible for Medicare.

The Affordable Care Act (ACA) gave states the option to expand their Medicaid programs to cover low-income adults aged 19-64 with incomes up to 138% of the federal poverty level (FPL), $20,783 for an individual in 2024. To date, 41 states have adopted the Medicaid expansion, leading to significant improvements in health outcomes, economic mobility, and financial security for those enrolled.

But the interaction of expansion Medicaid and Medicare may disrupt some of these gains. People cannot be on both Medicare and expansion Medicaid, which means that when someone with expansion Medicaid becomes Medicare-eligible, they are at risk of losing their Medicaid coverage. This can pose a significant problem because of the differences between the two programs—Medicare has significantly more out-of-pocket costs than Medicaid and does not cover some services that Medicaid programs can, like dental care, home health aides, and over-the-counter medications.

Some may purchase supplemental coverage, such as a Medigap, but others may find the policies unaffordable. Others may be eligible for different Medicaid programs. For example, those with very low incomes can usually switch to Medicaid for aged, blind and disabled people (ABD Medicaid) or enroll in a Medicare Savings Program (MSP). But not everyone will qualify. Most states have more stringent rules for these programs than for expansion Medicaid, often with lower income limits and asset tests that require people have minimal savings. In addition, the application processes and other administrative requirements can be overly burdensome, likely causing some who are eligible to miss out. Some people may not even try to sign up because they don’t know these programs exist. MSPs in particular are chronically underenrolled.

As a result, many who transition from expansion Medicaid to Medicare are left with Medicare alone, leaving them exposed to higher out-of-pocket costs and less comprehensive coverage. This is what’s known as the “Medicare cliff.”

The researchers used interviews, data analysis, and literature reviews and found that people experiencing the Medicare cliff were more likely to be female and retired, and to subsequently have significant declines in their financial and physical health. The report also found that expanding ABD Medicaid and MSP eligibility, improving beneficiary education and outreach, and simplifying Medicaid and Medicare enrollment processes—including by increasing funding for State Health Insurance Assistance Programs (SHIPs) and other assistors—would greatly help boost program participation as well as beneficiary health and well-being.

This aligns with previous research findings that beneficiaries affected by abrupt cost-sharing changes are more likely to struggle with affordability and forego care. They also tend to fill fewer prescriptions, in part because of their relatively low uptake of Part D subsidies, which Medicare beneficiaries automatically receive if they have Medicaid.

It also builds on previous work by NCOA and the Medicare Rights Center exploring best practices for states to help expansion Medicaid enrollees transition to other forms of assistance, including non-expansion Medicaid and MSPs.

Medicare Rights strongly supports increasing income limits for ABD Medicaid and MSPs, eliminating asset limits, and streamlining applications and redeterminations for these vital programs. We also strongly support increased funding for SHIPs and passage of the long-overdue BENES 2.0 Act, which would provide advance notice to people approaching Medicare eligibility about basic enrollment rules.

Read the report.

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