Financial Vulnerability among Older Adults and the Design of Resource Limits for Safety Net Programs

Amanda Kreider, University of Pittsburgh and Karen Shen, Johns Hopkins University

Despite near-universal Medicare coverage, healthcare costs remain one of the most significant strains on the finances of older households. The Medicaid program can provide protection against these costs for low-income households by paying for services not covered by Medicare (e.g., long-term care) and by subsidizing Medicare’s premiums and cost-sharing. However, Medicaid’s strict eligibility criteria for older adults, including an asset test that has not been updated in decades, may both inhibit access and reduce economic security among those enrolled in the program. First, these criteria may force older adults to decide between depleting their savings to access necessary care or forgoing such care altogether. Second, Medicaid’s eligibility requirements may increase financial vulnerability among enrollees, especially for the increasing share of older adults with functional disability who are choosing to “age in place” and who rely on savings to maintain their standard of living.

We will use the Health and Retirement Study, linked to administrative data on Medicare and Medicaid enrollment, to (1) describe trends in Medicaid enrollment and financial vulnerability among older adults, including trends in the use of different pathways to Medicaid eligibility; and (2) evaluate the impact of Medicaid eligibility policies on Medicaid enrollment and financial vulnerability, using both across-state and within-state variation in these limits over time. This project will provide critical evidence to policymakers on whether Medicaid is able to protect the economic security of retirees with high healthcare needs, as well as which groups may continue to be at risk for financial vulnerability in the current policy environment. Additionally, as states and the federal government are actively exploring options for reforming these requirements, our analysis will provide timely evidence on the likely cost and welfare implications of these policies.