You’ve heard of the senior discount. Less well known is the senior penalty, which trips up thousands of low-income Californians who seek to enroll in Medi-Cal (our state’s Medicaid program) after they reach their 65th birthday. This post explains the senior penalty, highlights the problems it creates, and describes the solution proposed by Assembly Bill 2430 (Arambula), which will be heard by the Assembly Health Committee today, April 3.
Background: Medi-Cal and the Federal Medicare Program Work Together to Keep Seniors Healthy
The federal government provides health care for adults age 65 and up, regardless of income, through Medicare. Medicare is distinct from Medi-Cal, which uses federal and state dollars to fund health coverage for people with low incomes, including many seniors. Medicare covers a broad range of benefits and services, such as hospitalizations, doctor visits, and prescription drugs. However, Medicare does not pay for many services that play an important role in keeping seniors healthy, including long-term supports and services (LTSS). LTSS helps older adults as well as people with disabilities to live independently in their own homes and avoid placement in more costly institutional settings, such as skilled nursing facilities. Medi-Cal fills this gap by covering many services — including LTSS — that are not available through Medicare and therefore is a critical source of coverage for low-income seniors in California.
The Senior Penalty: Many Californians Cannot Access No-Cost Medi-Cal After They Turn 65 Because the Income Limit for Seniors Is Lower Than for Younger Adults
Thanks to California’s robust implementation of the federal Affordable Care Act (ACA), low-income adults age 64 or younger generally qualify for no-cost health care services through Medi-Cal. In other words, they pay no premiums and have no out-of-pocket costs, such as co-pays or deductibles. The “countable income” limit — gross income less allowable exclusions and deductions — for these adults is pegged to 138% of the federal poverty line, which is equal to $1,397 per month for an individual in 2018. The federal government annually adjusts the poverty line for inflation, which means the dollar amount of the income limit for no-cost Medi-Cal that applies to adults under age 65 rises each year to reflect changes in the cost of living.
However, once they turn 65, many Californians face a distressing situation: they cannot access no-cost Medi-Cal because the countable income limit for seniors, which is set by the state, is much lower than it is for younger adults.* For seniors living on their own, the limit is equal to 100% of the poverty line — currently $1,012 per month for an individual — plus $230, which results in a monthly threshold of $1,242 in 2018. This is $155 less than the limit that applies to adults age 64 or younger.
The dollar amount of the income limit that applies to seniors generally goes up modestly each year. However, this limit has never been fully adjusted for inflation because the $230 that is built into the state’s formula has remained frozen since this formula was established in 2000. As a result, the income limit for no-cost Medi-Cal continuously loses ground to the rising cost of living. In 2000, for example, adults age 65 and older could qualify for no-cost Medi-Cal so long as their income did not exceed a threshold that was equal to about 133% of the poverty line. But because this threshold’s value has steadily eroded, it is equivalent to only about 123% of the poverty line today and will continue to lose value relative to the cost of living. In short, state law creates an “eligibility gap” for no-cost Medi-Cal between seniors and younger adults — a gap that will grow even larger in the years to come unless state policymakers take action.
Raising the Income Limit for No-Cost Medi-Cal, as Proposed by AB 2430, Would Prevent Many Seniors From Being Saddled With a Large Deductible, or “Share of Cost”
AB 2430 would eliminate the senior penalty by establishing a new state formula that would allow adults age 65 and older — potentially as many as 20,000 — to qualify for no-cost Medi-Cal with countable incomes up to 138% of the poverty line. This change would create parity between older and younger adults as well as prevent seniors from falling into a deep financial hole in order to maintain access to the services that Medi-Cal provides. This financial hole is generated by state rules that apply to seniors whose incomes exceed the limit for free Medi-Cal (currently $1,242 per month). Specifically, the state requires these individuals to pay a deductible (known as a “share of cost”) that can amount to hundreds of dollars per month in order to access Medi-Cal services.
Because Medi-Cal’s rules are complex and individual circumstances vary, there are many reasons why older adults may find themselves faced with a large Medi-Cal deductible. One simple way to illustrate the problem is to look at how Medi-Cal’s rules affect two people — one age 64, the other age 65 — who have the same countable income ($1,350 per month). As shown in the chart below, the 64-year-old would qualify for no-cost Medi-Cal because her income would fall below the threshold that applies to adults age 64 and younger ($1,397 per month in 2018). In contrast, the 65-year-old would not qualify for free Medi-Cal because her income would exceed the much-lower threshold that applies to seniors ($1,242 per month in 2018). As a result, the senior would have to spend $750 on health care in any given month before Medi-Cal would begin paying for any remaining medically necessary services during that same month, leaving only $600 to pay for rent, utilities, food, and all other basic living expenses.**
Low-Income Seniors With a Large Share of Cost Face Difficult Choices About How to Allocate Their Modest Monthly Budgets
Clearly, older Californians living on modest incomes cannot easily afford to pay a huge monthly deductible in order to access Medi-Cal services. Some seniors may try to manage this challenging situation by prioritizing housing costs, food, and other basic necessities over paying their Medi-Cal deductible, thus foregoing critical medical services — at least for a while. For other seniors, this “wait and see” approach may not be a viable option. They may find it financially impossible to continue living on their own without access to no-cost Medi-Cal and, as a result, opt to move into a Medi-Cal-funded nursing home — both giving up their independence and driving up state and federal costs for their care, compared to the much-lower cost of in-home care.
Medi-Cal’s Share-of-Cost Rules Are Administratively Burdensome and Hard to Understand
In addition to imposing a financial burden on low-income seniors, the rules that determine an individual’s Medi-Cal share of cost are administratively burdensome for counties to implement and difficult for many seniors to understand. As the California Health Care Foundation has explained, “calculating and tracking share of cost amounts can be complicated and confusing for beneficiaries,” in part because “individuals may not understand which expenses qualify to meet their share of cost or know when their share of cost has been met.”
A First Step in Strengthening Older Californians’ Access to Health Coverage
Medi-Cal’s unreasonably stringent income rules for older adults essentially amount to a penalty on seniors. By raising the Medi-Cal income limit for seniors to 138% of the poverty line, AB 2430 would 1) create parity between older and younger adults and 2) remove the primary obstacle that prevents thousands of low-income adults age 65 and older from accessing no-cost health care services through Medi-Cal — services that are critical to seniors’ health and well-being.
Of course, even if AB 2430 were signed into law, seniors with countable incomes above 138% of the poverty line would continue to face large monthly Medi-Cal deductibles. Therefore, rather than being viewed as a panacea, AB 2430 should be seen as a key first step in helping to ensure older Californians’ access to affordable health care coverage.
— Scott Graves
* This eligibility gap between seniors and younger adults exists for a couple of reasons. First, seniors were not included in the ACA’s expansion of Medicaid eligibility to 138% of the poverty line, which applies only to adults under age 65. As a result, decisions affecting seniors’ eligibility for Medi-Cal are largely left to the states. Second, California policymakers have failed for almost two decades — including in the wake of the ACA’s enactment in 2010 — to update the state formula that determines seniors’ eligibility for no-cost Medi-Cal.
** In this example, the $750 share of cost results from subtracting what is sometimes called a “Maintenance Need Allowance” (MNA) — as determined by the state — from the 65-year-old’s countable monthly income. The MNA for an individual is $600, a figure that has not been adjusted since 1989. The share of cost is based on the following calculation: $1,350 (countable monthly income) less $600 (MNA) = $750 (share of cost).