Health care law creates a Medicaid loophole

By: Times-Dispatch Staff | The Associated Press
Published: June 22, 2011

WASHINGTON --

President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they found only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for Health and Human Services.

Up to 3 million people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits no longer would be counted as income for determining eligibility.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting. It's almost like allowing middle-class people to qualify for food stamps, he said.

"This is a situation that got no attention at all," Foster said. "And even now, as I raise the issue with various policymakers, people are not rushing to say, … 'We need to do something about this.' "

Indeed, administration officials and senior Democratic lawmakers say it's not a loophole but the result of a well-meaning effort to simplify rules for deciding who will get help with insurance costs under the new health care law. Instead of a hodgepodge of rules, there will be one national policy.

"This simplification will stop people from falling into coverage gaps and may cause some to be newly eligible for Medicaid and others to no longer qualify," said Brian Cook, spokesman for the Centers for Medicare and Medicaid Services.

But states have been clamoring for relief from Medicaid costs, complaining that just these sorts of federal rules drive up spending and limit state options. The program now is one of the top issues in budget negotiations between the White House and Congress. Republicans are pushing for a rollback of federal requirements that block states from limiting eligibility.