Is Medicaid expansion reducing disability claims?

The number of Americans applying for Supplemental Security Income benefits dropped in the first six months of this year compared to the same period last year, and experts are debating whether the decline is partly related to the healthcare reform law's Medicaid expansion to low-income adults.

A total of 1,189,567 SSI disability claims—mostly related to physical or mental disability— were filed in the first six months of 2014, compared with 1,330,169 during the same period last year, a drop of 10.6%, according to data obtained by Modern Healthcare from the Social Security Administration through a Freedom of Information Act request. The total decline in SSI claims in states that expanded Medicaid in the first six months of 2014 was 11.2%, compared with 10.0% in non-expansion states.

At the same time, the unemployment rate across the U.S. unemployment dropped as well, falling 1.1% between June 2013 and June 2014. The average rate of the decrease was the same in Medicaid-expansion and non-expansion states.

The reason some experts say expanding Medicaid to childless adults up to 138% of poverty may have reduced SSI claims is because qualifying for SSI benefits automatically makes a person eligible for Medicaid in 39 states. It's thought that one major reason people apply for SSI is to receive Medicaid coverage. But with the Medicaid expansion to low-income adults this year under the Patient Protection and Affordable Care Act, people in expansion states no longer have to apply for SSI to get Medicaid. In addition, experts say that being able to access treatment for mental or physical health issues with newly acquired Medicaid coverage means more people can stay in the workforce, making it unnecessary to file for SSI.

“Prior to the Medicaid expansion, if you were a poor individual with serious health issues, if you didn't have children, SSI may well have been the only path to health insurance,” said Elizabeth Lower-Basch, a policy coordinator at the Center for Law and Social Policy, a liberal think tank based in Washington, D.C. “At least some people are likely to have applied for SSI more for the health insurance coverage than for the income. With expanded Medicaid eligibility, they wouldn't need to do so.”

If expanding Medicaid under the healthcare reform law drives down SSI claims, that could save states money. That's because federal government now picks up 100% of the tab for Medicaid coverage obtained under the ACA expansion (later dropping off to 90%), while states pay 30% to 40% of the cost when people enroll through the SSI program.

But other observers say the improving economy and the drop in unemployment is responsible for the dip in SSI claims applications, not the Medicaid expansion. “It's not clear to me that the drop in claims is because of Medicaid,” said Joseph Antos, a healthcare economist with the conservative-leaning American Enterprise Institute, which opposes the Affordable Care Act. “Obviously 2014 is better than 2013 because the economy is improving.”

The Medicaid-expansion states showing the steepest drops in disability claims were North Dakota (19.9%), Rhode Island (18.5%), Arkansas (16.8%), West Virginia (17.6%), Kentucky (15.0%), Oregon (14.0%), Iowa (13.4%), Massachusetts (13.1%), Illinois (12.4%), Minnesota (12.3%), and Ohio (12.2%).

The non-expansion states showing the sharpest drops in disability claims were Wyoming (19.2%), Nebraska (17.1%), Maine (16.8%), Idaho (15.1%), New Hampshire (14.6%), and Kansas (14.5%). Michigan, with a 19.9% drop in SSI claims, expanded its Medicaid program effective April 1, 2014, while New Hampshire, with a 14.6% drop in claims, expanded Medicaid on July 1.

The data show that 68% of expansion states that expanded Medicaid starting Jan. 1, 2014 (17 of 25 including the District of Columbia) had percentage declines in disability claims greater than 10%, whereas 50% of the non-expansion states (11 of 26) had declines greater than 10%.

Legislators in expansion states say they are pleased that Medicaid expansion may have played a role in reducing disability claims. “With Medicaid expansion, we are seeing people who are getting their health into compliance and are actually able to get back into the workforce,” said Barbara Sears, a Republican state representative in Ohio who supported her state's controversial expansion.

“There are some people on SSI who got it because they couldn't get healthcare services otherwise,” said Tom Burch, a Democratic state representative in Kentucky. “If expansion has reduced the need to get SSI, I think that's a good thing.”

The SSA declined to comment on whether Medicaid expansion was related to the decline in SSI claims. “At this point, Social Security can't speculate about Medicaid expansion and how it relates to disability application levels,” agency spokesman Mark Hinkle said.

SSI is a needs-based federal program for people who are either aged (65 or older), blind, or disabled. It's funded by general revenues. Overall, around 8.1 million Americans received SSI benefits each month in 2013, up nearly 20% from 7 million a decade ago. Of those who got SSI in 2013, nearly 7 million people received payments because of a disability, according to the SSA. To get SSI for disability, people must demonstrate they are unable to “engage in substantial gainful activity” because of a physical impairment, according to agency guidelines.

Disabled people who are eligible under SSI not only tend receive Medicaid but also qualify for other public assistance offerings such as supplemental nutrition assistance. SSI provides a monthly federal cash payment of $721. On top of that, each state makes up its own rules about how much they add to the monthly benefit, ranging from$10 to $200.

A person getting SSI can be employed, but as their income increases their SSI benefits drop. If a person's countable resources, or what they have in the bank, exceeds $2,000 a month, they no longer are eligible for SSI.

The SSI program is sometimes confused with the Social Security Disability Insurance (SSDI), which is funded through Social Security payroll taxes. SSDI beneficiaries must be younger than 65. After receiving SSDI for two years, beneficiaries become eligible for Medicare.

Between the two programs, nearly 16 million Americans received disability checks in 2013, according to the SSA. There has been criticism about the growth of the programs and their impact on the federal budget.

Federal spending on the SSI program in 2013 totaled $53.4 billion, up from $51.7 billion in 2012, according to the SSA. State expenditures for SSI have held steady at $3.3 billion for the last few years.

Federal law generally requires states to extend Medicaid to SSI recipients. But the law allows states to establish different eligibility requirements than the SSI disability program has. There are 11 states were people need to apply separately for SSI and Medicaid, and where they may be found eligible for one program but not the other. These states include Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma, and Virginia.

But since most states had automatic eligibility, childless adults often have used SSI as a gateway to Medicaid coverage. “It's long been thought that some applicants to SSI are more interested in Medicaid eligibility, but they apply to SSI as one sure way into Medicaid,” said Elizabeth Powers, an associate professor of economics at the University of Illinois. “Medicaid (is) the program they're really most interested in not SSI,” she said.

That's why she thinks the Medicaid expansion may have contributed to the drop in SSI claims.

“It's certainly plausible that expansion of public health insurance would reduce applications for SSI,” said David Autor, an economics professor at Massachusetts Institute of Technology. “People turn to SSI when they are desperate—no work, no income, no insurance. If Medicaid takes care of their medical costs, they may be able to continue seeking work or working at low wages.”

“A healthier worker is more capable of remaining in the workforce,” said Rob Jones, executive director of Community Action Kentucky, an anti-poverty advocacy organization.

But others, particularly those who oppose the Affordable Care Act, say the drop in SSI claims from the first six months of 2013 to the first six months of this year had nothing to do with Medicaid expansion. “More salient might be the economy's growth rates during 2013 and 2014 and the decline in unemployment,” said Jagadeesh Gokhale, a senior fellow with the libertarian Cato Institute, which opposes the reform law. “Recall that economic growth was considerably more anemic during 2013, especially during the first quarter, compared to 2014.”

Some experts cautioned that the drop in SSI claims would have to continue for several years at a greater pace in expansion states than non-expansion states to demonstrate that Medicaid expansion was the likely cause of the decline.

Arkansas State Sen. Jonathan Dismang, a Republican who supported Medicaid expansion, said he and his colleagues had hoped that expanding Medicaid would reduce the number of people in the SSI program. “It's too early to say with any certainty that that's the case,” he said. “I think that there's an indication that there has been an impact.”

—with Rachel Landen and Paul Demko

Follow Virgil Dickson on Twitter: @MHVDickson