Medicaid and Ticket to Work: States' Early Efforts to Cover Working Individuals with Disabilities
Released: 2003-06-13T00:00:00

Letter

Background

Eligibility for benefits under SSI, DI, Medicare, and Medicaid programs for individuals with disabilities is determined in part on whether an individual has a disability as defined in the Social Security Act. For purposes of these programs, a person is disabled if he or she has a medically determined physical or mental impairment that (1) has lasted or is expected to last at least 1 year or result in death and (2) prevents the person from engaging in substantial gainful activity (SGA). As of January 2003, SGA is defined as countable earnings—generally gross earnings less the cost of items that, because of the impairment, a person needs to work—of more than $800 per month. The Social Security Administration’s (SSA) interpretation of disability specifies that for a person to be determined to be disabled, the impairment must be of such severity that the person not only is unable to do his or her previous work but, considering the person’s age, education, and work experience, is unable to do any other kind of substantial work that exists in the national economy.

The Ticket to Work and Work Incentives Improvement Act of 1999 allowed states to expand the availability of Medicaid coverage for individuals with disabilities who work, even though they earn more than the SGA level. States that implement Ticket to Work Buy-In programs may consider as disabled those individuals who, except for the fact that they are earning more than the SGA $800 monthly amount, otherwise would meet the Social Security Act definition of disabled.

Individuals with Disabilities Qualify for Medicaid Primarily through SSI or DI Eligibility

Individuals with disabilities become eligible for Medicaid in a variety of ways but primarily through SSI or DI eligibility (see table 1). Individuals with disabilities, however, must also meet Medicaid income and asset requirements in order to obtain Medicaid coverage. Both the SSI and DI programs contain work incentive provisions designed to assist individuals with disabilities to achieve gainful employment while retaining some eligibility for health care coverage.

Individuals receiving SSI also are assured eligibility for Medicaid in 39 states and the District of Columbia. The remaining 11 states (known as 209(b) states) may use different standards for disability, income, or assets; thus, SSI beneficiaries in these 11 states may not have assured eligibility for Medicaid. Work incentives under SSI allow individuals to (1) have their SSI cash benefits gradually reduced as earnings increase, rather than having cash benefits removed entirely once earnings exceed the SGA limit, and (2) maintain their Medicaid coverage up to an income limit that varies across the states (from $15,049 (170 percent of the FPL) in Arizona to $39,228 (443 percent of the FPL) in New Hampshire as of 2002).

Individuals receiving DI also may become eligible for Medicaid under certain circumstances. By virtue of their DI disability determination, they meet one of the categorical eligibility requirements for Medicaid. However, they must also meet Medicaid’s income and asset requirements as defined by each state. DI beneficiaries can “spend down” their income on medical expenses in order to meet state-determined income limits for the medically needy eligibility category, if a state provides this optional coverage. While DI beneficiaries receive health care coverage through Medicare, eligibility for the medically needy category provides Medicaid- covered services that are not covered by Medicare, such as most outpatient prescription drugs. Work incentives under DI are structured such that if an individual’s work activity increases to a level where he or she is no longer deemed disabled, the individual loses DI eligibility, and in turn, Medicaid eligibility.

Medicaid Buy-In Program Designed to Expand Coverage for Working Individuals with Disabilities

The Ticket to Work Medicaid Buy-In builds on an earlier effort to expand Medicaid eligibility for individuals with disabilities who desire to work. Through the Balanced Budget Act of 1997 (BBA) (Pub. L. No. 105-33, 111 Stat. 251), the Congress gave states the option of implementing a coverage category for working individuals with disabilities. For these individuals, the BBA authorized states to extend Medicaid coverage to those who meet the SSI definition of disability and exceed the SSI income eligibility limit but whose income remains under 250 percent of the FPL. States electing the BBA option may require beneficiaries to pay premiums or may use other cost-sharing provisions as long as they are set on a sliding scale based on income. As of December 2002, 12 states had implemented a BBA option for working individuals with disabilities.

The Ticket to Work Medicaid Buy-In legislation expands the availability of Medicaid coverage for individuals with disabilities who desire to work by allowing them to gain or maintain Medicaid eligibility as they enter the workforce or to increase their earnings if they are in the workforce. The Ticket to Work Buy-In builds on the BBA option by giving states unlimited flexibility to set higher income and asset levels for two new eligibility groups—Basic Coverage Group and Medical Improvement Group—for working individuals with disabilities. (For a comparison of the two programs, see table 2.)

The Basic Coverage Group allows states to cover people aged 16 to 64 who, except for the amount of their earned income, would be eligible to receive SSI benefits. States may establish their own income and asset standards or elect to have no standards at all. As with the BBA option, states electing the Basic Coverage Group may require participants to pay monthly premiums or may impose other cost-sharing mechanisms if they are set on an income-based sliding scale. However, for individuals with annual incomes less than 450 percent of the FPL, states may not impose premiums that exceed 7.5 percent of income. Additionally, if the individual’s adjusted gross income for federal income tax purposes exceeds $75,000, the state must require the individual to pay the highest amount of premiums that an individual would be required to pay under the state’s premium structure, although a state is allowed to subsidize this cost with its own funds. While the Basic Coverage Group Buy-In participants must have earnings, the Ticket to Work legislation does not specify a minimum level of employment for this group. Since states cannot adopt rules defining employment for this group that are more restrictive than those in federal law, states cannot establish requirements such as minimum earnings or hours worked.

The Medical Improvement Group allows states to cover working individuals who lose Medicaid eligibility under the Basic Coverage Group because their conditions have improved to the point that they no longer meet the SSI definition of disability but still have “a severe, medically determinable impairment.” The same premium requirements apply as for the Basic Coverage Group. If a state elects to cover the Medical Improvement Group, it must also cover the Basic Coverage Group. While the Ticket to Work legislation does not set an employment standard for the Basic Coverage Group, it provides a definition and also allows a state to define employment for the Medical Improvement Group. According to the legislation, an individual qualifying for the Medical Improvement Group is considered employed if the individual is earning at least the minimum wage and working at least 40 hours per month. Alternatively, a state may use hours of work, wage levels, or other measures to define employment if the Secretary of Health and Human Services approves the definition.

Individuals with Disabilities Had Lower Employment, Education, and Income—and More Insurance Coverage— than the General Population

Compared with the rest of the working-age population, the estimated 6.7 million working-age individuals with disabilities nationwide were more likely to be not working, have less education, and have incomes below the FPL. Specifically, 82 percent of working-age individuals with disabilities, or about 5.5 million individuals, reported that they were not working. (See fig. 1.) Nearly three-fourths of working-age individuals with disabilities reported they had a high school education or less. Furthermore, these individuals were nearly three times more likely than individuals without disabilities to have incomes below the FPL. At the same time, individuals with disabilities were less likely to be uninsured compared with the rest of the working-age U.S. population, with just 9 percent of those with disabilities reporting being uninsured, compared with 15 percent for the rest of the working-age population. Nearly half of individuals with disabilities who reported having health insurance obtained coverage through public sources, such as Medicaid and Medicare.

Working-age individuals with disabilities were far more likely to have public health coverage than working-age individuals in the general population. Specifically, working-age individuals with disabilities were about eight times more likely to have public health insurance coverage than other working-age individuals. Generally, the lower the income level, the more likely an individual with disabilities was to have public health insurance coverage. For example, 75 percent of individuals with disabilities who had incomes below the FPL had public health insurance, while fewer than 20 percent of those with incomes at or exceeding 400 percent of the FPL had public coverage.

The extent of their health care costs underscores the need for individuals with disabilities to maintain some type of health insurance coverage to help cover the costs of their care. Health care expenditures for working- age individuals with disabilities were about five times the expenditures for other working-age individuals, annually averaging about $7,600 and $1,500, respectively.

States’ Buy-In Programs Expanded Eligibility and Increased Cost Sharing for More Workers with Disabilities

The 12 states that opted to implement the Ticket to Work Medicaid Buy-In program as of December 2002 set income and asset levels for eligibility that provided new opportunities for working individuals with disabilities to secure and maintain Medicaid coverage. DI-eligible individuals benefited particularly because states’ broader eligibility categories under the Buy-In allowed individuals to become eligible for Medicaid without spending down their incomes and to remain eligible when their incomes rose to higher levels. In addition to expanding income eligibility and asset limits, all states took advantage of the flexibility of the statute to charge premiums or copayments to ensure that Buy-In participants shared in the cost of their health care coverage.

Twelve States Expanded Medicaid Eligibility Levels for Working Individuals with Disabilities

Across the 12 states that opted to implement Ticket to Work Medicaid Buy-In programs, all set eligibility requirements that expanded eligibility for working individuals with higher incomes or more assets than usually allowed under their Medicaid programs. As of December 2002, the number of Buy-In participants for the 12 states totaled 24,258, ranging from 3 participants in Wyoming to almost 8,500 participants in Missouri. (See table 3.) Eleven of the 12 states set Buy-In eligibility limits for income at twice the FPL or higher—or $17,720 per year for an individual in 2002— thereby expanding opportunities for individuals to secure and maintain Medicaid coverage. Buy-In programs also allowed participants to retain more assets than usually allowed in states’ Medicaid programs. Of the 12 states, 7 states set asset limits that ranged from $10,000 to $30,000 for individuals, couples, or both. Three states— Missouri, Indiana, and Arkansas—opted for asset requirements of $4,000 or less for an individual, while the remaining two states—Washington and Wyoming— imposed no asset limits.

States generally allowed Ticket to Work participants to exclude certain assets from the asset limits. In addition to excluding the value of certain assets that applied to most individuals with disabilities in the Medicaid program when determining eligibility, 10 of the 12 states allowed Buy-In participants to save money in retirement accounts such as Individual Retirement Accounts, Keoghs, and 401(k)s; medical savings accounts; or special accounts that allow individuals to save for expenses such as modifications for job or home and education costs. These accounts are not considered when determining asset limits for participants. Two states— Arkansas and Indiana—set $10,000 and $20,000 limits, respectively, on the amount of savings participants can accumulate in these accounts. State officials in a few states said allowing participants to exclude these retirement accounts and other assets helped support states’ goals of affording working individuals with disabilities greater independence and self-sufficiency. For example, under these rules, participants can save to buy cars or homes and can set aside money for retirement.

Buy-In Programs May Offer Greatest Benefit to DI Participants

In most of the 12 states, the Buy-In programs were especially beneficial for DI-eligible individuals who, in contrast to most SSI individuals, were not always eligible for Medicaid coverage. Prior to the Ticket to Work legislation, DI individuals in 11 of the 12 states could qualify for Medicaid by spending down their incomes to specified levels (Wyoming did not offer a spend-down option). In these 11 states, the spend-down income eligibility levels ranged from 15 percent to 100 percent of the FPL. Under the new Buy-In programs, the income eligibility levels significantly exceeded those established under the spend-down categories (see fig. 2), thus allowing individuals to qualify for the Medicaid Buy-In directly— rather than spending down their incomes to qualify for Medicaid coverage. For example, an individual receiving DI in Arkansas could obtain Medicaid coverage through the Buy-In program with an income up to 250 percent of the FPL; prior to the Buy-In, the individual would have had to incur medical expenses that reduced his or her income to approximately 15 percent of the FPL in order to qualify for the spend-down category of Medicaid. This allows an individual with disabilities in Arkansas to maintain an income of up to $22,150 per year under the Buy-In, whereas that person would have had to spend down to an income of $1,300 a year to qualify for Medicaid.

Buy-In programs afforded DI beneficiaries more immediate—and sometimes expanded—Medicaid coverage. In addition to relieving individuals of the requirement to spend down their income to qualify for Medicaid, DI individuals, who are not entitled to receive Medicare coverage until they have been receiving DI cash benefits for 24 months, also received more immediate health insurance coverage through the Medicaid Buy-In. Buy-In participants may also have access to a more expanded benefit package than individuals who receive Medicaid through a state’s medically needy program.

However, when considering participation in the Buy-In program, DI beneficiaries must weigh the benefits of the higher earnings allowed under the program against the possible loss of DI cash benefits and Medicare coverage if their earnings increase beyond a certain threshold. Specifically, after a 9-month trial work period and a 36-month extended period of eligibility, if a DI beneficiary’s earnings increase over the SGA limit in any month, the individual loses DI eligibility entirely. Additionally, DI beneficiaries who earn more than the SGA level after the initial 9-month trial period could lose Medicare coverage after 8-1/2 years. The loss of entitlement for Medicare may be of concern for those individuals with disabilities who would not reach age 65 by the end of the 8-1/2-year time period. To the extent that a state reduced its Medicaid Buy-In eligibility level, or discontinued its Buy-In program, these former DI-eligible Buy-In participants could potentially be without health care coverage until they reached age 65.

In contrast, SSI beneficiaries have different considerations than those weighed by DI beneficiaries in deciding whether to enroll in the Medicaid Buy-In program. Most SSI beneficiaries were assured eligibility for Medicaid and thus did not need the Buy-In program or to spend down their incomes in order to qualify for Medicaid. SSI beneficiaries in Medicaid would receive the same benefit package as those in a Buy-In program. Even SSI beneficiaries who worked could remain eligible for Medicaid as participants in a work incentive program, which allowed individuals to increase their incomes while maintaining their Medicaid coverage. In 5 of the 12 states, Buy-In income eligibility levels were lower than the Medicaid eligibility levels for individuals in the SSI work incentive program, and Buy-In eligibility levels only slightly exceeded those for the SSI work incentive beneficiaries in another 5 states. Additionally, beneficiaries in SSI’s work incentive program are not subject to premium payments in Medicaid, while Buy-In programs generally have imposed premium requirements for participants.

All States’ Buy-In Programs Required Cost Sharing

States may require Buy-In participants to share in the cost of their health care coverage. All 12 states adopted cost-sharing mechanisms, primarily premiums or copayments, for Buy-In participants. States calculated premiums for Buy-In participants using various methods. For example, Pennsylvania and Washington set premiums as a percentage of allowable income, while Indiana and Kansas established varying premium levels for different incomes. (See table 4.) Generally, states assessed premiums when income was at 100 percent of the FPL or higher. Among states that charged premiums in 2002, the percentage of participants whose incomes were high enough to be charged premiums varied significantly across the states, from 12 percent of participants in Connecticut to all or nearly all participants in Illinois, Pennsylvania, Washington, and Wyoming. Average monthly premiums ranged from $26 to $82, with nearly half of the states setting premiums from $40 to $60. Two states—Arkansas and New Jersey—did not charge premiums as of December 2002. Stating that premiums were difficult to administer and collect, Arkansas chose not to impose a premium requirement. New Jersey has a premium requirement for participants with incomes greater than 150 percent of FPL; however, the state did not assess premiums because only about 5 percent of beneficiaries owed a payment.

Three states—Connecticut, Indiana, and New Hampshire—reported discounting the Buy-In premium if participants also paid premiums for Medicare part B, for employer-sponsored insurance coverage, or for individual insurance coverage. For example, New Hampshire deducted the Medicare part B premium from a participant’s total Buy-In premium. If a Buy-In participant were paying a Medicare part B premium of $54 a month, his or her Medicaid Buy-In premium would be discounted by that amount. Thus, if a participant’s Buy-In premium were $80 a month, the monthly premium for the Buy-In program would be discounted to $26 a month. In Connecticut, any amount that participants pay for Medicare part B premiums, employer-sponsored coverage, or other out-of-pocket medical insurance is deducted from their premium liability. For example, if a participant owes a Buy-In premium of $100 a month and also is paying an employer $80 a month for private coverage, the individual’s Buy-In premium liability would be reduced to $20.

Participants in 8 of the 12 states also were required to pay copayments for health care services, such as $0.50 to $3 for an office visit or prescription drugs. Copayments for inpatient hospital care generally varied from $3 per day in Illinois to $48 per hospital stay in Kansas. In 7 of these states, copayments were the standard cost-sharing requirements for Medicaid. The remaining state—Arkansas—imposed a two-level copayment system for participants. Arkansas Buy-In participants with incomes below 100 percent of the FPL had the same copayment requirements and were charged the same amounts for pharmacy and inpatient hospital services as usually prescribed under the state’s Medicaid program. Participants with incomes of 100 percent of the FPL or greater were charged additional copayments for services and equipment such as physician services ($10 per visit), outpatient mental and behavioral health services ($10 per visit), and prosthetic devices (10 percent of the maximum Medicaid payment).

Buy-In Participants in Four States Generally Had Prior Medicaid Coverage and Worked in Low-Wage Jobs

In the four states in which we conducted more detailed work— Connecticut, Illinois, Minnesota, and New Jersey—Buy-In programs enrolled many individuals who previously were enrolled in Medicaid, often in eligibility categories with more restrictive income limits, such as the medically needy category. Buy-In participants in the four states generally also had Medicare coverage. Across the four states, few Buy-In participants had coverage from private insurance at the time of their enrollment in the Medicaid Buy-In programs. Based on the limited participation in private insurance, officials in several states did not believe that “crowd-out”—the substitution of newly available public coverage for private health insurance—was a concern for the Medicaid Buy-In programs. The limited employment information available for participants from two of the four states—Connecticut and Minnesota—showed that Buy-In participants generally were employed in low-wage jobs—many making less than the SGA threshold, which at the time was $780 per month. These four states, however, had little information regarding the extent to which the Buy-In programs fostered employment among individuals with disabilities.

Buy-In Participants Often Had Previous Coverage under Medicaid and Medicare

Across these four states, the share of Buy-In participants with previous Medicaid coverage was 53 percent in Connecticut, 81 percent in Illinois, 61 percent in Minnesota, and 58 percent in New Jersey. Whereas previous Medicaid coverage was largely due to eligibility through spend-down provisions, Buy-In participation allowed them to retain more of their income or assets and still qualify for Medicaid. Of those who switched from existing Medicaid coverage to the Buy-In program, Illinois and Minnesota estimated that 79 percent and 51 percent of participants, respectively, were beneficiaries who originally had spent down their income to qualify for Medicaid. While not offering a specific estimate, a New Jersey official indicated that most of the Buy-In participants who were enrolled in Medicaid before switching to the Buy-In category also had spent down their income to qualify for Medicaid. Buy-In eligibility was particularly beneficial for individuals in New Jersey because the state’s Medicaid coverage for medically needy beneficiaries did not include prescription drugs or community-based long-term care services, both of which were covered under the Buy-In.

In three of the four states—Connecticut, Minnesota, and New Jersey— more than 80 percent of Buy-In participants also received health care coverage through Medicare. (See table 5.) State officials reported that those with Medicare relied on the Medicaid Buy-In for purposes of obtaining outpatient prescription drug coverage since Medicare generally does not cover this benefit. Few participants—less than 10 percent of participants in any of the four states—reported having employer- sponsored coverage at the time of their enrollment into the Medicaid Buy- In programs. For example, Connecticut, which requires Buy-In applicants who have access to employer-sponsored insurance coverage to apply for this coverage, found that less than 6 percent of Buy-In applicants had health care coverage through their workplace. For Buy-In participants with private health insurance coverage, which often has more limited benefits than those covered by Medicaid, the Buy-In can serve as a “wrap around” to private coverage by providing such services as home health and personal care, and items such as durable medical equipment.

According to officials in several states, crowd-out was not a concern for Buy-In programs because most participants did not report having private health insurance coverage at the time of their enrollment into the Medicaid Buy-In programs. For example, Minnesota and New Jersey state officials said they did not view crowd-out as a significant issue for this population because many of the participants worked part-time and were rarely offered private insurance coverage. Additionally, both Minnesota and Connecticut required individuals to either enroll or remain enrolled in employer-sponsored coverage if it was offered. As of December 2002, these states had not formally analyzed whether Buy-In participants withdrew from private health insurance coverage prior to obtaining Medicaid coverage. New Jersey officials plan to monitor whether employees are deciding to or are being urged to pursue the Buy-In program rather than their employer-sponsored coverage.

Available Employment Information Shows Participants Worked in Low-Wage Jobs and Experienced Minimal Increases in Earnings

In the three states with data available, working individuals with disabilities who qualified for the Medicaid Buy-In program generally worked in low- wage jobs. (See table 6.) While one purpose of the Ticket to Work legislation was to enable individuals with disabilities to reduce their dependency on federal cash benefit programs through earnings from work, available data from Connecticut, Illinois, Minnesota showed that few participants earned more than the SGA limit, which was $780 in December 2002. Sixty-four percent of participants in Connecticut, 61 percent of participants in Illinois, and 77 percent of participants in Minnesota had earned income well below the SGA limit. None of these states had asked participants to identify their occupation or the industry in which they were employed on their Medicaid Buy-In applications; however, some states may conduct broader analyses of participants’ employment as part of required evaluations under a related Ticket to Work grant program.

Two of the four states we reviewed could identify whether participants had increased their earnings once enrolled in the Buy-In. Forty percent of Minnesota participants and 28 percent of Connecticut participants increased their earnings between the time of initial enrollment and December 2001, the most recent date for which these data were available. Average monthly increases over previous earnings were $306 in Minnesota and $332 in Connecticut. New Jersey and Illinois were not able to provide this information. Minnesota found that 64 percent of those in the state’s Buy-In program as of December 2001 earned wages for at least one 3- month period in the 2-year period prior to enrollment. Minnesota officials cautioned that the analysis was limited by the lack of detail in the state database; for example, they did not know whether participants were disabled during this entire period, or whether individuals were consistently employed.

Agency and State Comments

We provided a draft of this report for comment to CMS and the 12 states in our sample. In its comments, CMS said that, in addition to the states with existing BBA and Ticket to Work Buy-In programs, at least three more states are planning to implement a Medicaid Buy-In program within the coming year, which would result in over half of the states offering health insurance to workers with disabilities. CMS noted that the expansion of Medicaid coverage to these individuals is encouraging particularly because states are experiencing fiscal budget constraints. CMS also said that it is collecting information on Medicaid Buy-In participants’ earnings and Medicaid costs for the first 2 years of operation. In addition, CMS expects to complete an extensive study of states’ experiences for 2001 and 2002 with the Buy-In programs authorized under both the BBA and the Ticket to Work and Work Incentives Improvement Act of 1999 in the fall of 2003 and to report its findings in 2004.

CMS also suggested that, in view of general concerns over racial disparities and access to care in rural areas, it might be helpful for us to comment on these demographic factors as part of our findings. We did not include these factors in our scope of work, even for the four states where we did more detailed work, and therefore cannot comment on them. CMS provided technical comments, which we have incorporated as appropriate. The full text of CMS’s written comments appears in appendix II.

Eleven of the 12 states responded with technical comments, which we incorporated where appropriate.

We will send copies of this report to the Administrator of the Centers for Medicare & Medicaid Services and other interested parties. We also will make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http//www.gao.gov.

If you or members of your staffs have any questions regarding this report, please contact me on (202) 512-7118 or Carolyn Yocom at (202) 512-4931. Other major contributors to this report were Catina Bradley, Karen Doran, Kevin Milne, and Elizabeth T. Morrison.

Appendix I: Methodology for Developing Estimates and Characteristics of Working- Age Individuals with Disabilities

To develop a national estimate and compare the characteristics of working-age individuals with disabilities with those for working-age individuals in the rest of the population, we analyzed data available from the Medical Expenditure Panel Survey (MEPS) household component, which provides data on individuals’ demographics, employment, health characteristics, and medical spending.

MEPS, conducted by the Agency for Healthcare Research and Quality (AHRQ), consists of four surveys and is designed to provide nationally representative data on health care use and expenditures for U.S. civilian noninstitutionalized individuals. For our analysis, we used one of the four surveys—the Household Component. The Household Component is a survey of individuals regarding their demographic characteristics, health insurance coverage, and health care use and expenditures. The 1997 and 1998 versions of the MEPS Household Component were the most recently available at the time of our analysis that had both (1) a pooled estimation file published by AHRQ that allows pooling 2 or 3 years of data, and (2) complete demographic, health insurance, and health care expenditure data. We pooled data from 1997 and 1998 in order to increase our sample sizes for individuals with disabilities. Using the Medical Care Consumer Price Index from the Bureau of Labor Statistics, we inflated 1997 medical care expenditures to 1998 values.

Our estimate of working-age individuals with disabilities includes individuals aged 16 to 64 with one or both of these conditions: (1) needing help or supervision in performing activities of daily living (ADL) or instrumental activities of daily living (IADL) because of an impairment or a physical or mental health problem or (2) being completely unable to work at a job, do housework, or go to school.

Our analyses of working-age individuals with disabilities are based on a sample size of 1,680, representing a population of 6.68 million individuals with disabilities. Table 7 shows the unweighted and weighted sample sizes on which our analyses are based.

Appendix II: Comments from the Centers for Medicare & Medicaid Services