Hello 2014, Goodbye Medicaid Asset Limit

Blog Post
Jan. 2, 2014

The first day of 2014 marked the official first day of expanded insurance coverage under the Affordable Care Act. This is a big deal. As Wonkblog notes, yesterday ushered in “the most significant change to our health-care system” in nearly fifty years.

Though much of the discussion around the ACA rollout has focused on how many Americans have signed up for private plans, a lesser known impact of the new law is that millions of Americans are now eligible for Medicaid. The Washington Post offered a nice assessment of these changes earlier this week. One small, but critical, aspect of the Medicaid expansion is the  elimination of the Medicaid asset limit. This provision will allow millions of low-income families to both get the health coverage they need and maintain or build a modest savings cushion. The Medicaid expansion has been rejected by half of the states but the elimination of the asset test applies to all states, not only those that have adopted the expansion. States will still have discretion to impose limits on elderly and disabled beneficiaries, but the majority of Medicaid enrollees will now be able to save freely.

In many ways the arguments about the ACA are economic in nature. President Obama often cites the law as a major part of his efforts to limit exploding inequality, and critics of the law also focus on economic concerns. For new users of Medicaid, evidence suggests that these changes bring good economic news. Access to Medicaid alone has been found to have a significant positive impact on low-income families’ economic security; one recent study from Oregon found that low-income individuals with Medicaid were far less likely to face “catastrophic out-of-pocket medical expenditures” or fall behind on bills due to medical expenses than other low-income families. Eliminating the asset limit enhances Medicaid’s positive impact by allowing families to develop their own resources to cope with other forms of financial hardship and plan for the future.

Families shouldn’t be forced to choose between protecting their health and protecting against the unexpected. Thanks to the ACA, many won't have to. Still, the impact of this reform is limited, since many newly eligible Medicaid families may also be accessing other safety net supports, such as TANF or SNAP, which still have low asset limits in place in many states. This inconsistency sends families mixed messages about saving and cuts off one proven pathway to upward mobility. Eliminating the Medicaid asset limit is a great step forward; here's hoping for more comprehensive asset limit reform in 2014.