Minimum Wage, Maximum Care

As the minimum wage rises, Americans at the margins of society face the loss of health insurance eligibility for Medicaid. While a “living wage” is important to some policy makers, health may be more important than money.

Minimum wage laws exist to improve the economic conditions of the working poor.  The minimum wage is set by the federal government; however, individual states may exceed the federal limit.  Consideration for increasing the minimum wage incites major debate, particularly, surrounding decreased employment of minimum wage workers as a potential result.  The major potential public health consequence under debate is that an increase in minimum wage will cause a decrease in access to care.  As part of a 3-step increase, the federal minimum wage has gone from $5.15 in 1997 to $5.85 in 2007 to its current rate of $7.25.  As of 2007, the income earned by a full-time minimum wage worker ($12,168) represented only 70 percent of the federal poverty level for a family of three ($17,170).

This study analyzed a data set consisting of measures of health care access from the CDC’s Behavioral Risk Factor Surveillance System and state-level data from 1996-2007. Ecological data reflecting policy, labor force characteristics, and demographics were collected from the US Census Bureau, Bureau of Labor Statistics, and other sources. The authors were most interested in the potential effects of the minimum wage on health care access for working adults ages 18-64 years.  Respondents with longer than one year unemployment or more than a high school diploma (or GED) were excluded in order to focus the study on unskilled workers.

The outcome variables were 1) lack of health insurance and 2) cost-related unmet medical need.  A significantly greater proportion of workers in states with minimum wages exceeding the federal minimum wage reported being uninsured (p<0.01).  Minimum wage was significantly associated with the odds of being uninsured in unadjusted and partially adjusted models (p<0.001), but there was no significant effect of minimum wage on insurance rates when state and regional effects were introduced to statistical models (OR 0.990; 95 percent CI 0.863-1.069).  Evidence suggests that higher minimum wages are significantly associated with reduced odds of workers reporting cost-related barriers to needed medical care after adjusting for ecological co-variates, state and region effects, individual demographics, and health characteristics (OR 0.853; 95 percent CI 0.750-0.971).

The authors concluded that there was lack of evidence to suggest that increasing the minimum wage would have detrimental effects on health insurance and access to care.

Commentary

Perhaps one of the most significant changes brought about by the Affordable Care Act (ACA) is the expansion of Medicaid for non-elderly individuals who fall below 133 percent of the federal poverty level (FPL).   For minimum wage workers who are less likely to be insured, this expansion could provide essential medical coverage.  Medicaid expansion brings the US one step closer to closing the gap of disparity in insurance coverage, access to care, and hopefully health outcomes.

Because the study did not address how previous wage increases have affected employment of minimum wage workers, it does not address the argument that access to care will decrease due to a decreased number of employed unskilled workers.  If, however, workers with higher minimum wage salaries are less likely to report cost-related barriers to medical care, then increasing the minimum wage might be a step in the right direction.  The caution, however, lies in bringing minimum wage families above the 133 percent  FPL threshold. Since minimum wage workers are overall less likely to be insured, this might actually create rather than close a gap.

To consider whether an increase in minimum wage could affect access to care,  the following simplified example is offered. While the federal minimum wage has not changed since 2007, the FPL for a family of three has increased from $17,170 to $18,310. This provides evidence that minimum wage and FPL do not undergo simultaneous changes.  For a family of three, 133 percent of the current FPL is $24,352. The current full-time minimum wage worker at $7.25/hr grosses $12,168 annually.  A household of three with two adults earning minimum wage can gross just slightly below 133 percent of the FPL, earning $24,336, making them eligible for Medicaid under ACA.  Consequently, increasing the minimum wage without adjusting the FPL might render many minimum wage workers ineligible for Medicaid coverage.

At or above 133 percent of  the FPL, minimum wage workers would be ineligible for Medicaid, leaving three options: 1) purchase private insurance with the help of federal subsidies, 2) remain uninsured and pay a penalty, or 3) find creative means by which to remain Medicaid-eligible.  Even with subsidies, purchasing private insurance might prove difficult.  An adjustment to the federal poverty level should seriously be considered if the minimum wage is to be increased to avoid creating a gap in health coverage and access.

McCarrier KP, et al.  Associations between minimum wage policy and access to health care: evidence from the Behavioral Risk Factor Surveillance System, 1996-2007. Am J Public Health. 2011 Feb;101(2):359-67.