The Role of Medicaid and SCHIP as an Insurance Safety Net

The Role of Medicaid and SCHIP as an Insurance Safety NetStephen Zuckerman and Allison Cook, The Urban InstituteAugust 2006Most people with private health insurance in the United States get it through an employer-sponsoredinsurance (ESI) plan. However, in recent years, the likelihood of having ESI has been falling, as it becomesmore and more difficult for employers and employees to afford the costs of these plans.1Losing ESI is aparticularly serious problem among low-income families, for whom purchasing private coverage on their ownwould represent a severe financial hardship. Policymakers recognize this hardship and provide assistance forsome of these people through Medicaid and the State Children’s Health Insurance Program (SCHIP).2Eligibility for these two major public programs favors children over adults in virtually every state. In fact,almost 75 percent of all uninsured children are eligible for Medicaid or SCHIP, compared to only 14percent of uninsured adults.3This broad eligibility for children’s coverage through public programs will bedebated over the next year as Congress considers the reauthorization of the SCHIP program. It is likely thata number of important issues will be discussed as part of the reauthorization process, including how muchfederal funding is needed and whether the federal government should continue giving states the latitude tocover parents and higher-income children with SCHIP funds.This data brief explores how well Medicaid and SCHIP actually protected health insurance coverage forlow-income children in comparison to low-income adults (low-income is defined as those with incomebelow 200 percent of the federal poverty level [FPL])(i.e., $38,614 for a family of four in 2004).4Becausethe decline in ESI coverage did not occur uniformly across states, and because states have discretionregarding who is eligible for public coverage and how programs are administered, we ask, “Did publiccoverage tend to offset the reduction in ESI in some states more than in others?” Data and MethodsThis analysis uses data from the 2001 and 2005 March Supplements to the Current Population Survey(CPS). The CPS is a monthly household labor force survey that collects national employment andunemployment statistics. The March Supplement contains detailed income and health insuranceinformation.5Because health insurance and income data collected on the CPS are meant to reflect theprevious calendar year, we refer to the data by years 2000 and 2004. The analysis focuses on the low-income, non-elderly, civilian, non-institutionalized population. Because state-level changes in health insurance coverage may be subject to greater random errors due tosurvey measurement than national estimates, we grouped states to produce more reliable estimates based ona ranking of changes in ESI among low-income adults between 2000 and 2004. We developed threecategories of states based on these changes: (1) a reduction in ESI of greater than 6 percentage points; (2) areduction in ESI of 3 to 6 percentage points; and (3) a reduction of less than 3 percentage points (includingincreases in ESI coverage). We used the ESI change among low-income adults as opposed to the ESIchange among the entire low-income population, because ESI coverage of adults is not likely to be affectedby eligibility for Medicaid or SCHIP. We also report state-level data, but these estimates should beinterpreted with caution and only to the extent that they are statistically significant. A full set of state-levelresults is available in Table 2. 1Funding for this research and Issue Brief provided by the Robert Wood Johnson Foundation ResultsThe data in the top panel of Table 1 show that, in both 2000 and 2004, low-income children were muchmore likely to have Medicaid or SCHIP and much less likely to be uninsured than low-income adults.However, in this brief our focus is on exploring how changesin the various types of health insurancerelated to each other for these two population subgroups.6Nationally, between 2000 and 2004, the rate of ESI for low-income adults fell by 4 percentage points (from33.9 percent to 29.7 percent) and by 5.5 percentage points for low-income children (from 36.1 percent to30.6 percent). During this period, coverage under Medicaid or SCHIP increased by 8 percentage points forlow-income children (from 36.5 percent to 44.7 percent). For low-income adults, Medicaid or SCHIPcoverage rose by only 2 percentage points (from 16.1 percent to 17.9 percent).The increase in Medicaid or SCHIP coverage for low-income children more than offset the reduction inESI and lowered their uninsurance rate by 2 percentage points (from 21.9 percent to 19.5 percent). For low-income adults, the uninsurance rate rose by about 3 percentage points (from 37.6 percent to 40.3 percent). The changes in ESI that these state-administered public programs needed to offset varied dramaticallyacross groups of states. Data in the bottom three panels of Table 1 show how insurance