The Health Care Financing Maze for Working-Age People with Disabilities

44 Pages Posted: 11 Feb 2007

See all articles by Nanette J. Goodman

Nanette J. Goodman

Independent Consultant

David C. Stapleton

Mathematica Policy Research, Inc.

Gina A. Livermore

Mathematica Policy Research

Bonnie O'Day

Cornell University Institute for Policy Research (CUIPR)

Date Written: January 2007


People with disabilities often require substantial medical services and supports to lead fulfilling lives. Health care expenditures for working-age people with disabilities are almost four times the expenditures of their counterparts without disabilities, about $8,300 per year in 2003, compared with $2,100 per year on average (Agency for Healthcare Research and Quality 2003). These expenditures are covered by a variety of sources: private health insurance, Medicare, Medicaid, and a wide variety of other public health care programs. In 2002, federal expenditures for the health care of people with disabilities totaled an estimated $102 billion, mostly under the Medicare and Medicaid programs ($93 billion); states paid an additional $45 billion (Goodman and Stapleton, 2005).

Despite a high level of public spending on medical care for working-age people with disabilities, the existing health care system is not adequately meeting the needs of this diverse population. Access to services is often determined by age, income, disability type, current work status and previous work experience, and many people face major gaps in needed services.

The health care financing system is complicated by the fact that major financiers of health care for people with disabilities - primarily the states, the federal government, employers, and the individuals and their families - have, over the years, sought to reduce their own costs by shifting liabilities to each other. As the cost of health care has increased, so has the intensity of cost-shifting efforts. As a result, the financing of health care for people with disabilities, especially long-term care, and other forms of chronic care services, resembles "a multidimensional, temporally endless game of hot potato, in which beneficiaries and the services they need are regularly tossed from one set of hands to another - and often fall on the floor in the process" (Vladeck, 2001).

Making matters worse is the fact that access to financing is linked to work status. The public/private health insurance system can make it difficult for people with disabilities to move into and out of the labor market because most private coverage is obtained through employers and most public coverage is linked to a determination of inability to work. Recent initiatives, most notably the Medicaid buy-in programs, authorized by the Balanced Budget Act of 1997 and the Ticket to Work and Work Incentives Improvement Act of 1999, have attempted to break the link between public health insurance eligibility and employment, but have had only moderate success and serve to further complicate the system (Goodman and Livermore, 2004).

Much of the research on health care financing for people with disabilities has focused on the Medicaid and Medicare programs. The findings of this research often highlight the inadequacies of those programs in providing appropriate services to address the special needs of people with disabilities. A focus on these large programs, however, obscures the role of other public and private insurers, as well as the role of programs that provide many additional services to this population – all of which add complexity to the system.

The purpose of this paper is to describe the financing system as a whole, including the large public programs, other public and private insurers, and the many other programs that provide additional services. The description of the system highlights structural problems that need to be addressed in order to substantially improve the delivery of health and related services to people with disabilities. In the next section, we describe each source of health care financing for working-age people with disabilities and highlight its implications for service delivery and quality of life. In the concluding section, we describe the key structural shortcomings of the current financing system, assess the extent to which current reform efforts are addressing these shortcomings, and discuss the implications for broader efforts to reform health care financing system.

Keywords: disability, health insurance

JEL Classification: I18

Suggested Citation

Goodman, Nanette J. and Stapleton, David C. and Livermore, Gina A. and O'Day, Bonnie, The Health Care Financing Maze for Working-Age People with Disabilities (January 2007). Available at SSRN: or

Nanette J. Goodman (Contact Author)

Independent Consultant ( email )

16512 Kipling Rd
Derwood, MD 20855
United States

David C. Stapleton

Mathematica Policy Research, Inc. ( email )

1100 1st St NE
12th Floor
Washington, DC 20002-4221
United States
202-484-9220 (Phone)

Gina A. Livermore

Mathematica Policy Research ( email )

600 Maryland Ave SW
Suite 550
Washington, DC 20024
United States

Bonnie O'Day

Cornell University Institute for Policy Research (CUIPR) ( email )

1341 22nd Street
Washington, DC 20037
United States
202-223-7670 ext. 103 (Phone)
866-371-1633 (Fax)


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