Will the ACA reduce the disability rolls?

Two years ago, I was riveted by TNR reporter Alec MacGillis' chat with a woman on line for a free REM medical clinic in rural Tennessee. Notwithstanding that she knew nothing about the ACA, she offered a stunning instant analysis, once the basics were described to her, of one likely economic effect:

..it it was hard to find visitors to the clinic who would not benefit directly from the law. Barbara Hickey, 54, is a diabetic who lost her insurance five years ago when her husband was injured at his job making fiberglass pipes. She gets discounted diabetic medication from a charity, but came to the clinic to ask a doctor about blood in her urine.

Under the law, she would qualify for Medicaid. Her eyebrows shot up as the law was described to her. "If they put that law into effect, a lot of people won't need disability," she said. "A lot of people go onto disability because they can't afford health insurance."

Lo, Ms. Hickey was a prophet (perhaps). In Arkansas, which has sliced its uninsured rate almost in half since ACA enactment, mainly by enrolling nearly 200,000 Arkansans in the state's "private option" Medicaid alternative, disability claims seem to be dropping.* Modern Healthcare's Paul Demko reports:**

The number of Arkansas residents signing up for federal disability benefits has dropped 19% since October 2013, which some state officials are attributing to expanded Medicaid eligibility.

First-time applicants decreased from 17,497 to 14,160 through Tuesday, according to the state's Social Security determination agency.

That's only one data point and may be a blip. But it's all the more noteworthy as disability claims nationwide have risen alarmingly in recent years -- up 20% over the last decade, according to Demko, and holding steady nationally over the past year. Once people get on, they rarely get off -- in large part because they have no alternative access to health insurance.

In states that have accepted the ACA Medicaid expansion, that is no longer the case. Moreover, a shift of a citizen's health insurance from Medicaid linked to SSI to Medicaid under the ACA saves the state money, as Demko explains:

If Arkansas residents are indeed forgoing disability benefits because they can get healthcare coverage through Medicaid, it would have positive financial ramifications for the state's budget. That's because the federal government only picks up about 70% of the tab for healthcare coverage when individuals enroll through the disability program, as opposed to 100% for Medicaid under the Patient Protection and Affordable Care Act through 2016 [and 90% thereafter].

The ACA has been lambasted for creating disincentives to work -- first by enabling people to work reduced hours or go freelance or stop working altogether and get subsidized insurance, and second, by making subsidized insurance grow more expensive for those whose incomes increase, particularly if they lose eligibility for Medicaid.  The CBO has estimated those effects to be modest -- and the incentives also have the positive effect of reducing "job lock," freeing people to take risks such as starting a business, or simply to reduce work hours and care for a sick relative or go back to school.  To those offsetting benefits we may be able to add reduced incentives to get on, or even to stay on, disability.

 * Alas, Ms. Hickey won't benefit, if she's a native of Tennessee, which refused the Medicaid expansion. MacGillis's article was published on the even of the Supreme Court decision that made the expansion optional for the states.

**Thanks to Adrianna McIntyre for flagging this article.