Eliminating Disability Lifeline Would Cost More Than it Saves

A proposal to eliminate Disability Lifeline (DL) – a core support structure for people with short-term disabilities – would save the state little while imposing higher costs for Washington’s overall health care system.

Policymakers are currently working to address a roughly $1 billion budget shortfall for the remainder of the biennium.  In part, the Senate proposes to address the shortfall by getting rid of assistance which helps thousands of individuals who cannot work due to a medical condition such as a physical disability or mental illness. Terminating assistance for people with disabilities is a bad idea. First and foremost, eliminating DL would put lives on the line by depriving over 15,000 people of needed basic medical care.  Doing so would also represent short-sighted economic policy that would:

• Result in the immediate loss of over $50 million in federal funds: In 2011, Washington state received approval from the federal government to begin early implementation of Medicaid expansion, a key component of health care reform that will extend coverage to childless adults with annual incomes up to $15,028.(1)Under the expansion, the federal government matches 50 percent of the costs to cover this population which includes the entire Disability Lifeline caseload.
• Hinder the implementation and cost-effectiveness of health care reform: Beginning in 2014, Medicaid expansion under health care reform will cover the entire Disability Lifeline population, with the federal government paying 100 percent of the cost (gradually decreasing to a 90 percent match in 2020). If DL is eliminated before this reform goes into effect, we will have lost an opportunity to provide continuous coverage for a population that is extremely vulnerable. Breaks in coverage have the potential to lead to worsening health conditions and can make it more difficult and expensive to identify and enroll people once they leave the system of care.
• Shift the cost to consumers and businesses: While state support for individuals with disabilities could go away, their health needs would not. Hospitals and clinics, the primary system of care for DL clients, would continue to serve this population, but most of it would be uncompensated.  Recent estimates suggest that hospitals and clinics will lose an estimated $28 million and $39 million, respectively, if Disability Lifeline were eliminated (see graph below). (2)  When the costs to cover the uninsured become substantial, they get passed on to consumers and businesses in the form of higher health care premiums and out-of-pocket costs. Current estimates show that the hidden or invisible cost of uncompensated care is about $1,017 per insured family per year. For individuals, the hidden cost is about $368.(3)

As budget negotiations continue to unfold, lawmakers should remember that Disability Lifeline is a necessary and smart investment that protects our most vulnerable, prepares us for health care reform, and reduces health care costs for all of us.

1. According to the law, Medicaid expansion covers individuals with incomes up to 133% FPL, however, there is an income disregard of 5%, making 138% a more accurate figure.

2. Estimates from Washington State Hospital Association and Community Health Network of Washington.

3. State of the uninsured: Health coverage in Washington State, Costs, Trends and Projections 2008 to 2014. Office of Insurance Commissioner, Dec. 13, 2011.