Cost-Sharing and Premiums in Medicaid: What Rules Apply?
Publication Date: February 2007
Author(s): Judith Solomon
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Economic projections; Health insurance; Health care costs; Income diversity
A substantial body of research shows that higher co-payments are likely to cause low-income people to decrease their use of necessary health care services. Low-income people with chronic health conditions are the most vulnerable to harm from cost-sharing, as they use the most health care services. Research also shows that premiums can make it difficult for low-income people to enroll in Medicaid and keep their coverage. When low-income people are unable to pay premiums or cost-sharing charges, they may end up using more expensive forms of care such as emergency room or inpatient hospital care. The Deficit Reduction Act of 2005 (DRA) added a new provision to the Medicaid statute that gives states the option to impose cost-sharing charges and premiums on Medicaid beneficiaries in certain circumstances. The new provision did not repeal an existing section of the Medicaid law that also provides authority to states to impose cost-sharing. Aspects of the Medicaid rules on cost-sharing were then clarified in the Tax Relief and Health Care Act of 2006 (TRHCA), which was signed into law on December 20, 2006. The result is a confusing array of rules that provide for different treatment based on a beneficiary’s income, Medicaid coverage category, and the type of services being provided. This paper attempts to unravel these rules by summarizing how all the rules on cost-sharing and premiums apply to children and adults. Because of the potential harm cost-sharing and premiums can cause for low-income people, it is essential that these rules, which include a number of exemptions, limitations, and protections, be understood and followed by states.