The Ineffectiveness Of Asset Testing For Public Health Insurance Eligibility

Every once in a while, we see a story about someone taking tremendous advantage of public assistance programs.  And those stories tend to stick with us.  They get repeated and passed along and before we know it, there starts to be a pervasive feeling that such incidents are much more common that they actually are.

In an ironic twist, Colorado Republican lawmakers are calling for the state to return to a system of asset testing for Medicaid recipients… right on the heels of Colorado receiving a $26 million grant from the federal government because of the state’s efforts to expand access to Medicaid and CHIP.  Colorado received the grant money last week after increasing Medicaid/CHIP enrollment significantly over the past year.  In order to qualify for the grant, the state had to implement at least five of the provisions that are known to improve access to public health insurance for children, and one of those provisions is the “liberalization of asset requirements”.

Federal law prohibits states from adding new asset testing requirements for Medicaid recipients (which in and of itself would be quite the hurdle for state lawmakers to overcome), but more importantly, states – including Colorado – that have used asset tests in the past have found them to be ineffective from a cost standpoint.  Basically, it adds another layer of paperwork and administration to the Medicaid enrollment program, and rarely results in an applicant being disqualified because of excessive assets.

A study from the Kaiser Commission on Medicaid and the Uninsured that is described in this article basically found that there are very few low income families with significant assets.  Medicaid applicants are means tested, which applies to their income – they don’t qualify if their income is above a certain level.  But Colorado no longer goes through the cumbersome process of checking bank accounts, life insurance cash values, investments and home equity.  It ends up being a waste of time and money because nearly everyone who meets the means testing still qualifies after the asset testing.  But the state still has to pay for the administration of the asset-testing program.

All of that logic tends to fall on deaf ears however, once people hear a story like the one I linked to at the top of this post.  They know that someone was gaming the system and living in a million dollar home while collecting public assistance vouchers for food and housing.  And that really rubs people the wrong way.  It (rightly so) makes people feel cheated and indignant and on the lookout for other cheaters.  And I think that’s where public support for the idea of asset testing for public health insurance programs gets a foothold.

But if we take a step back and look at the facts, we see that asset testing is not only federally prohibited, it’s also a waste of time and money and isn’t going to be the magic solution that helps to shore up the financial backbone of Colorado’s Medicaid program.  It’s true that the Medicaid-eligible population in Colorado has grown considerably over the past few years, and the state is facing financial challenges.  But I don’t think that an asset-testing provision would suddenly find that many of those new enrollees have significant assets squirreled away somewhere.