Up to three million more 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 said 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.
Administration officials said Tuesday that they now see the problem. "We are concerned that, as a matter of law, some middle-income Americans may be receiving coverage through Medicaid, which is meant to serve only the neediest Americans," said Health and Human Services spokesman Richard Sorian. "We are exploring options to address this issue."
Administration officials and senior Democratic lawmakers initially defended the change, saying it was not a loophole but the result of a well-meaning effort to simplify the rules for deciding who would get help under the new health-care law. Instead of a hodgepodge, there would be one national policy.
But Sen. Orrin Hatch of Utah, ranking Republican on the Senate Finance Committee, called the situation "unacceptable" and said he intended to look into it.
Governors are clamoring for relief from Medicaid costs, complaining that federal rules drive up spending and limit state options. The program is one of the top issues in budget negotiations between the White House and Congress. Republicans want to roll back 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 is 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 an additional three years to get Medicare, unless they are disabled.
Some early retirees who worked all their lives may not want to join a program for the poor, but others might see it as a relatively painless way to satisfy the new law's requirement that most Americans carry health insurance starting in 2014. It would help tide them over until they qualify for Medicare at 65.
The actuary's office said the early retirees eligible for Medicaid would be on top of an estimated 16 million to 20 million new people that Obama's law already brings into the program by opening it to childless adults with incomes near the poverty level.
It's unclear how much it would cost to cover the retirees. Federal taxpayers will cover the entire initial cost of the expansion.
