Why Asset Tests Need Reform

The penalty for Bostonian jaywalkers can take dollars out of repeat offenders wallets. The $1 fine for jaywalking in the Massachusetts metropolis may be a ridiculous example of statutory dollar figures losing their significance, but the statutory dollar figures associated with Medicaid eligibility are anything but a laughing matter for millions of families.

The eligibility requirements around Medicaid expansion have ended the decades old practice of limiting assets for Medicaid coverage for children and parents. However, in order to qualify for many existing Medicaid programs, the elderly and people with disabilities in many states must still verify that their assets fall below a certain dollar figure. Oftentimes, this dollar figure is statutory and requires state legislatures to act in order to have the figure rise with inflation.

Asset tests were first incorporated into Medicaid law under the original legislation because welfare benefits required strict means and asset tests. These levels were determined at the state level. As eligibility was separated from welfare eligibility, specific dollar figures on assets were added to eligibility criteria and were meant to curb enrollment by “welfare queens” or people that qualify for social assistance fraudulently or with significant assets. President Reagan first campaigned on the concept of “welfare queens” in his failed 1976 bid for the presidency. But these fraudulent cases that the policy is meant to restrict are limited and more often the imposed asset tests prevent working-age adults from reducing dependency on social welfare programs.

The movement in states has been to eliminate the asset test requirements for people with disabilities. In 2015 Vermont eliminated its asset test requirement for all people with disabilities and Virginia, New Jersey, Florida and Michigan eliminated the requirement for working people with disabilities. But the dollar figure remains in place in dozens of states.

MIT professor, Andrea Campbell, wrote a book and articles about the experience of her sister-in-law in California who after a car accident was left a quadriplegic and faced with the difficulties that the laws around asset tests present to a young family faced with sudden disability. In California, their family could have $3,150 in assets excluding their home and one car. These limits prevent the family from saving for their child’s college fund, paying for retrofitting their house to accommodate the wheelchair and incentivizes both parents to reduce the amount of hours that they would be able to work in order to fall below the asset level.

But these levels are not only burdensome on individuals receiving the Medicaid benefit, the requirements are also burdensome for states to implement. Verifying assets requires hiring caseworkers and developing systems that understand the complex state regulations surrounding the programs for people with disabilities.

Further, the value of the asset limits has reduced as the rate of inflation increases. In California, the asset test has not been updated since 1989. The value of $3,000, the current asset level for a couple qualifying for Medicaid through disability has nearly halved over this period. Meaning, the intention of lawmakers in 1989 to limit a person’s assets is no longer being met; their dollar figure definitions no longer carry the meaning that was intended. This is illustrated in the graph shown here.

The growth of $3,000 1989 dollars based on CPI Inflation.
Source: Bureau of Labor Statistics CPI Inflation Calculator

While it may sound mundane, the decision of whether Medicaid eligibility standards are statutory or determined by state agencies have a profound impacts on the lives of people most in need of social services.

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