Obamacare’s massive Medicaid expansion—combined with its new system of subsidies for government-defined coverage for additional millions of Americans—will force 29.4 million Americans to move from one form of health coverage to another each year, a recent study shows.
The effect, called “churning,” is the involuntary movement of individuals from one type of coverage to another. While some churning existed before Obamacare, the health law makes the problem much worse, making continuous coverage less likely for many Americans.
New research by the Robert Wood Johnson Foundation and the Urban Institute concludes that 29.4 million Americans under the age of 65 will be forced to change their coverage from year to year under Obamacare. That represents 31 percent of the estimated 95.9 million people that will either be in Medicaid or receive subsidies in the exchanges in any given year.
According to the study, churning will include “6.9 million people who move from Medicaid to subsidized coverage in the exchange or vice versa; 19.5 million people who move between Medicaid and ineligibility for all insurance subsidy programs…and 3.0 million people who move between subsidized coverage in the exchange and ineligibility for all programs.”
This churning will occur because eligibility for both Medicaid and the new subsidy system are based on family income and family size. Thus, people will be forced to move in and out of different government-run health programs when their incomes or family size change. That churning will make the programs more complex and expensive to administer.
Moreover, consumers will have to learn about a new type of coverage every time they transition. Finally, the authors point out that “churning can lessen health plans’ incentive to invest in long-term wellness if insurers know that today’s enrollee may soon be served by a competitor.”
The authors refer to churning and its negative consequences as “inevitable,” but that is simply not true. The additional churning that will result from Obamacare is a side effect of the legislation’s poor design.
In contrast, The Heritage Foundation’s vision for health care reform would enable both current Medicaid-eligible individuals and working Americans to choose the health plans they like and then stick with them even as their circumstances and the types of assistance they qualify for change.
The plan transforms Medicaid and restores its original purpose as a safety net for the most vulnerable, disabled Americans. The Heritage plan would provide low-income families who are otherwise healthy with federal subsidies to purchase private coverage, as their fellow Americans do. Families up to 133 percent of the federal poverty level (FPL) would receive the full subsidy, which would be gradually phased out for those between 133 percent and 200 percent of FPL.
This approach avoids churning by getting rid of the sharp eligibility cutoff in Medicaid today. If a family’s income rose past the subsidy eligibility level, they would be able to keep the same plan and receive a tax credit to offset its cost, since the Heritage plan also provides tax credits for the purchase of health insurance for all but the wealthiest of Americans.
These reforms would put the decisions and dollars back in the hands of the consumer, decreasing dependence on government and allowing individuals—not the government, their employers, or anyone else—to decide what kind of health insurance they have.