The problem with the NBER paper on Medicaid reducing divorce

This week David Slusky and Donna Ginther released an NBER working paper which strongly suggested that Medicaid expansion reduced the prevalence of divorce by 5.6% among those aged 50-64. Their thinking is this- prior to the passage of the Affordable Care Act, the only way that many middle-income adults could qualify for Medicaid coverage was to spend down their assets to become eligible for one of Medicaid’s eligibility groups. Many people engaged in what is known as “medical divorce” when one spouse would become ill and need Medicaid services (particularly for long-term care services that Medicare does not cover). The couple would divorce so that the assets of the sick spouse would qualify them for the Medicaid asset test (often around $2,000 for an individual and $3,000 for a couple). Medicaid expansion allows all people regardless of assets apply for Medicaid coverage so long as their income is below 138 percent of poverty. Using a difference-in-difference approach comparing states that expanded Medicaid eligibility to 138% of the poverty level to states that did not expand, the authors found that divorce rates were lower in expansion states.

The problem with this paper is that Medicaid expansion did not entirely get rid of the asset test.

Medicaid is not one program. There are many avenues that a person can get Medicaid and the benefits and structure of that program look different for each eligibility group. Broadly speaking we can qualify Medicaid eligibility into MAGI and non-MAGI eligibility. The Affordable Care Act requires all states to use the Modified Adjusted Gross Income (MAGI) to calculate the eligibility for certain types of applicants (pregnant women, children, and the newly eligible Medicaid expansion adult population). These populations receive benefits that similar to private health insurance – hospital services, doctor services, and pharmaceutical drugs. They do not receive Medicaid long-term care services. There are certain groups that are exempt from MAGI eligibility (referred to as non-MAGI). These are Medicaid programs for the blind, disabled, and those over 65. These groups receive long-term care services. This is the population that typically engaging in medical divorces because private insurance and Medicare does not cover long-term care and Medicaid is the primary payer for long-term care services. Without Medicaid, people often pay up to $60,000-$80,000 annually for long-term care services which could impoverish families.

Yes, there could be some people that are early retirees or elderly couples that might need cancer care or other expensive hospital procedures and would qualify for Medicaid expansion rather than private insurance without the asset tests, but these are rare cases of people forgoing private insurance for the Medicaid medical safety net. Although high deductibles can be unaffordable for many, it is rarely the cause for divorce.

The paper does not look at divorce rates for populations over the age of 65 in states that have expanded versus those that did not expand. This might provide a more complete picture since the population over 65 is often the people who would divorce because of Medicaid asset test eligibility. If the rates similarly have gone down, perhaps there are other factors other than Medicaid expansion causing rates to fall.

Asset tests are prominent in Medicaid long-term care programs. In California, the asset test for a couple to qualify for Medicaid disability coverage was $3,000. California has not increased that amount in nearly 30 years. The value of that asset has halved since it was put into place in 1989. We haven’t eliminated asset testing and by believing they aren’t a problem we have made them worse because they have reduced in value. I wrote a longer explanation of the problem here.

The financial security that Medicaid provides does have large scale effects. Financial insecurity is a leading cause of divorce in the US and it is conceivable that more financially secure people because of the safety net of Medicaid expansion are less likely to divorce. However, reduced medical divorce to avoid asset tests is not happening because asset tests are alive and well in this country. I suggest that this may be the mechanism for the reduced divorce rates in those states. Alternatively there are many other causal factors that could be reducing divorce but asset limits are unrelated.

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