A Report from Families USA
May 1999

Losing Health Insurance: Unintended Consequences of Welfare Reform

INTRODUCTION

In the aftermath of the 1996 welfare reform law, welfare rolls have dropped dramatically across the country. While welfare reform has been hailed for decreasing the welfare rolls and moving former recipients to jobs, little attention has been devoted to the health coverage of those who lose welfare benefits. As this report shows, one of the unintended consequences of welfare reform is that many people lose Medicaid coverage and become uninsured. This is the first study to show a direct connection between the loss of welfare benefits and the loss of health insurance coverage.

Using data from the U.S. Census Bureau's Current Population Survey and from the Health Care Financing Administration, we have found that over two-thirds of a million low-income people—approximately 675,000—lost Medicaid coverage and became uninsured as of 1997 due to welfare reform. The majority (62 percent) of those who became uninsured due to welfare reform were children, and most of those children were, in all likelihood, still eligible for coverage under Medicaid. Moreover, the number of people who lose health coverage due to welfare reform is certain to grow rather substantially in the years ahead.

Because 1997 was the first year of welfare reform implementation, this study reports only the earliest consequences of welfare reform, before many of the time limits imposed by the new law take effect. This year, more people will be required to work in order to retain their welfare benefits. Most people moving from welfare into jobs wind up in entry-level positions with low salaries and no employer-subsidized health insurance. If, as required by law, they are granted 6 to 12 months of Medicaid coverage during the transition to work, they are then likely to join the ranks of the uninsured when their transitional coverage ends. Similarly, large numbers of people will be dropped from the welfare rolls in the future as they reach the 5-year lifetime limit on welfare benefits. When that happens, we can expect the number of uninsured to swell.

Key Findings

Welfare reform has contributed to the increase in the number of low-income people without health insurance. In 1997, an estimated 675,000 low-income people became uninsured as a result of welfare reform.

Welfare reform has contributed to declining Medicaid enrollment. As of 1997, 1.25 million people with incomes under 200 percent of the federal poverty level lost their Medicaid coverage as a result of welfare reform.

Children under age 19 made up the majority of people who became uninsured as a result of welfare reform. Of the 675,000 low-income people becoming uninsured as of 1997 as a result of welfare reform, more than three out of five (62 percent) were children. Of the 1.25 million people who lost Medicaid between 1995 and 1997 as a result of welfare reform, almost two-thirds (65 percent) were children.

More than half of both children and adults who would have been enrolled in Medicaid absent welfare reform were instead uninsured in 1997. Fifty-four percent of all people losing Medicaid as a result of welfare reform became uninsured.

Most of the children who had lost Medicaid as of 1997 as a result of welfare reform probably were still eligible for Medicaid and should not have lost that coverage. Considerably more than half of the children who lost Medicaid between 1995 and 1997 as a result of welfare reform were eligible under federal requirements.

Poor people are more likely than those just above the poverty line to become uninsured as a result of welfare reform. For people with incomes below the federal poverty level, nearly two out of three adults (62 percent) and over half of the children (57 percent) became uninsured when they lost Medicaid. The impact on those with incomes just over poverty was significant as well: for people with incomes between the federal poverty level and 200 percent of poverty, 45 percent of adults and 42 percent of children became uninsured when they lost Medicaid.

Minority children are more likely to go uninsured than white children as a result of welfare reform. When minority children lost Medicaid, about 58 percent became uninsured, while 41 percent of white children became uninsured when they lost Medicaid.

The number of people becoming uninsured as a result of welfare reform is likely to increase considerably in the years following 1997. These data show only the early-warning signs of welfare reform's impact on health insurance coverage for people with low incomes. As welfare reform is fully implemented over time, there will be large increases in the number of low-income uninsured people.

You may access the complete report via PDF. In order to read the PDF version, you must have the Adobe Acrobat Reader software on your computer. This software may be downloaded for FREE from the Adobe web site.

To receive a hard copy of the report, send check or money order, payable to Families USA for $15.00, to Losing Health Insurance c/o Families USA, 1201 New York Avenue NW, Suite 1100, Washington, DC 20005.