Effects of the Medicaid coverage cliff on low-income elderly Medicare beneficiaries

Abstract

The Medicaid coverage “cliff” occurs when Medicare beneficiaries with household income exceeding 100% of the federal poverty level lose eligibility for supplemental Medicaid coverage. Using a regression discontinuity design with data from Medical Expenditure Panel Survey and National Health and Nutrition Examination Survey for 2007–2019, we demonstrate that the cliff increases out-of-pocket spending by 25% and the probability of experiencing problems paying medical bills by 44.4% without decreases in overall health care spending. However, there is evidence that near-poor Medicare beneficiaries changed behavior in response to the cliff, increasing the use of high-value diagnostic and preventive testing by 8.8% and enrollment in a more affordable plan by 12.2%. The cliff does not encourage healthy behavior.