Lifting the Medicaid Asset Test: A Step in the Right Direction

Last week the Washington Post featured a piece focusing on the complexities of navigating the safety net – in particular, deciphering the eligibility rules in Medicaid as they apply to different individuals in the same family. I’ve written before about the inequities and frustrations in the public benefits system that result from different programs and different states applying remarkably varied income and asset tests. Currently, Medicaid is an especially egregious example; not only are there discrepancies among what types of resources are countable and which states have asset tests and which don’t, but also discrepancies regarding eligibility within the same household. Though upcoming reforms will vastly improve equity with respect to Medicaid access, greater coordination among means-tested programs—and ultimately the removal of asset tests altogether—is essential to creating a safety net that functions reliably and effectively for all.

As of January 2012, forty-seven states had eliminated their asset tests for the Children’s Health Insurance Program (“CHIP”) and children’s Medicaid; forty-three states had eliminated the Medicaid asset test for pregnant women; and twenty-four states had eliminated the Medicaid asset test for parents. Of the states that have retained asset tests, the asset limits vary significantly – from a low of $1000 in Georgia to a high of $30,000 just across state lines in South Carolina. Some states with asset tests exclude 529s, some don’t; some exclude IDAs, some count them. The attached chart helpfully summarizes the tests of all fifty states—though the sheer density of the information within the chart reveals the complexity of the variations among the rules from state to state.

The Affordable Care Act will yield major and important policy changes for Medicaid eligibility beginning in 2014 – including the elimination of the asset test for the class of people covered by the eligibility expansion and the standardization of the income test at 133% of the federal poverty line. These reforms are a big deal, and over time should significantly reduce states’ administrative costs, increase access and create a more transparent eligibility framework. When Oklahoma eliminated its own Medicaid asset test in 1997, the state saved approximately one million dollars. Likewise, Delaware reported that its asset test removal resulted in “administrative simplicity,” and Rhode Island stated that, “[the asset test] would cost more in administrative costs than the savings in denying care to low-income people.”

Still, as NAF’s analysis in A Penny Saved, Mobility Earned pointed out, there is significant overlap among the population accessing Medicaid and those accessing other means-tested programs such as SNAP or TANF. As a result, even if the asset test in one program is lifted, the tests in the other programs will continue to deter a family from saving or even maintaining a bank account; the “lack of coordination [among the states and programs] is pervasive, touching the treatment of all types of savings and assets, and establishes the most restrictive limit as the de facto limit for all programs to which families seek assistance.”

In other words, greater coordination among programs on the national level is necessary to make the removal or liberalization of any particular asset test effective in changing behavior and realizing the ability to save. President Obama’s proposal to create a $10,000 asset test floor for means-tested programs is a major step in the right direction that would facilitate a more predictable and equitable system; however, the $10,000 proposal specifically excludes Medicaid. Moreover, creating a standardized national test would do little—if anything—to curb the administrative costs of asset tests, which is another of the primary reasons to support their removal. The standard argument against removing asset tests is that the caseload will grow significantly as a result. Yet this has not been the experience of states such as Virginia and Louisiana that have lifted their TANF asset tests; in fact, Virginia’s caseload actually decreased.

Finally, and perhaps most importantly, the asset tests in these programs counter the programs’ very intent, by requiring families to remain both income and asset-poor in order to receive assistance. The asset poverty line—the amount a family would need to have in savings to live at the poverty line for three months in the absence of any other resources—is higher than the majority of states’ current TANF asset limits. Consequently, in order to qualify and remain eligible for assistance, families have to keep themselves in a financially precarious position and utterly forego setting aside any money for their or their children’s future.

 If self-sufficiency is the ultimate goal of programs like SNAP and TANF, then the programs must allow participants to save enough money to be able to support themselves and experience upward mobility. Asset tests send the wrong message and keep struggling families struggling.