Will Auto-IRA Plans Affect Medicaid Enrollment? – Center for Retirement Research

Abstract

In recent years, 16 states have introduced or are preparing to introduce auto-IRA programs that require employers without a retirement plan to enroll their employees in an IRA. Although research has begun to document the effects on nascent auto-IRAs, little attention has been paid to their interactions with other safety net programs, particularly Medicaid. This project uses a simulation model to test whether low- and moderate-income households will delay or stop receiving Medicaid because of their new auto-IRA savings. Specifically, it estimates how many years of Medicaid-free future families could purchase with their auto-IRA balances if the national program were implemented in 2019.

The paper found that:

• Workers without a college degree accumulate meaningful new savings in a hypothetical auto-IRA, although the magnitude is highly sensitive to modeling assumptions.
• Small groups in particular have time to build up large balances that can delay Medicaid acceptance.
• Older groups have modest balances and are less likely to delay Medicaid.
• Regardless of age, most participants will still turn to Medicaid for Long-Term Services and Facilities.

The policy implications of the findings are:

• Under current policy, families with moderate auto-IRA balances will have a stronger incentive to use their savings to qualify for Medicaid.
• Alternatively, states can change their Medicaid asset assessment to ignore all, or a portion, of auto-IRA savings.