‘Surge’ in Unemployment Will Boost Uninsurance Rate, Medicaid Enrollment and State Costs, Report Finds

The slowing economy and the fallout from the Sept. 11 attacks on the World Trade Center and the Pentagon has resulted in a "surge" in the unemployment rate, which will increase the number of uninsured and reliance on Medicaid, a new report from the Commonwealth Fund indicates. The report, "How the Slowing U.S. Economy Threatens Employer-Based Health Insurance," documents the connection between the loss of employment and the loss of health care coverage. Highlights from the report appear below.

• Unemployment leads to loss of health insurance: Thirty-seven percent of workers who lose their jobs also lose their health coverage. That rate is nearly three times higher than the 14% uninsurance rate for the general population. While 75% of unemployed workers are eligible for COBRA coverage -- which allows workers to retain employer-sponsored coverage by paying 102% of the premium -- only 20% purchase such coverage, "mostly due to cost."
• Low-income workers are often ineligible for COBRA: Low-income workers, who are more likely to work in small businesses, are more likely to be ineligible for COBRA coverage if they are laid off.
• The uninsured are less able to cover "basic" expenses: According to a Commonwealth Fund survey, 40% of the uninsured cannot pay for living costs such as food, rent, heating or electricity, compared to 12% of the insured population.
• The uninsured will impact state budgets: Under current Medicaid eligibility rules, a two percentage-point increase in the unemployment rate will add about 3.3 million people to Medicaid, which would cost $5 billion in one year. However, most states are currently reporting Medicaid budget shortfalls that may be $15 billion for 2002.