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updated: 6/21/2011 12:37 PM

A twist in Obama's health care law

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Associated Press

WASHINGTON -- President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

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Up to 3 million people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting. It's almost like allowing middle-class people to qualify for food stamps, he suggested.

"This is a situation that got no attention at all," added Foster. "And even now, as I raise the issue with various policymakers, people are not rushing to say ... we need to do something about this."

Indeed, administration officials and senior Democratic lawmakers say it's not a loophole but the result of a well-meaning effort to simplify rules for deciding who will get help with insurance costs under the new health care law. Instead of a hodgepodge of rules, there will be one national policy.

"This simplification will stop people from falling into coverage gaps and may cause some to be newly eligible for Medicaid and others to no longer qualify," said Brian Cook, spokesman for the Centers for Medicare and Medicaid Services.

But states have been clamoring for relief from Medicaid costs, complaining that just these sorts of federal rules drive up spending and limit state options. The program is now one of the top issues in budget negotiations between the White House and Congress. Republicans are pushing for a rollback of federal requirements that block states from limiting eligibility.

Medicaid is a safety net program that serves more than 50 million vulnerable Americans, from low-income children and pregnant women to Alzheimer's patients in nursing homes. It's designed as a federal-state partnership, with Washington paying close to 60 percent of the total cost.

Early retirees would be a new group for Medicaid. While retirees can now start collecting Social Security at age 62, they must wait another three years to get Medicare, unless they're disabled.

Some early retirees who worked all their lives may not want to be associated with a health care program for the poor, but others might see it as a relatively painless way to satisfy the new law's requirement that all Americans carry medical insurance starting in 2014. It would help tide them over until they turn 65 and qualify for Medicare.

The actuary's office said the 3 million early retirees who would become eligible for Medicaid are on top of an estimated 16 million to 20 million people that Obama's law would already bring into the program, by opening it to childless adults with incomes near the poverty level. Federal taxpayers will cover all of the initial cost of the expansion.

A spokeswoman for the Senate Finance Committee, which wrote much of the health care law, said if the situation does become a problem there's plenty of time to fix it later.

"These changes don't take effect until 2014, so we have time to review all possible cases to ensure Medicaid meets its mission of serving only the neediest Americans," said Erin Shields.

But Republicans already see a problem.

Former Utah governor Mike Leavitt said adding early retirees will "just add fuel to the fire," bolstering the argument from Republican governors that some of Washington's rules don't make sense.

"The fact that this is being discovered now tells you, what else is baked into this law?" said Leavitt, who served as Health and Human Services secretary under President George H.W. Bush.

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