Explainer: Work requirements in Medicaid

The Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees these two programs, issued guidance today on so-called “work requirements” for Medicaid. Here is everything you need to know:

Medicaid is one program in the social safety net. Two others, SNAP and TANF, respectively and colloquially referred to as “food stamps” and “cash assistance,” have had work requirements in place for over two decades. Supporters of tying work requirements to public benefit eligibility claim that there is dignity associated with work and if you work, you can then envision a path out of poverty and no longer need public assistance.

Medicaid has long been considered an exception to attempts to require low-income individuals to work in exchange for public assistance because there has been fairly broad consensus that an individual needs optimal healthcare in order to maintain employment. Furthermore, until the Affordable Care Act Medicaid expansion to low-income adults, most Medicaid enrollees qualified for Medicaid because they could not work (e.g., pregnant women, elderly or disabled individuals, and children).

Some conservative state legislatures and governors have requested that they be allowed to impose work requirements in order to maintain their Medicaid benefits. CMS’ guidance today made clear that they will not approve any state effort to apply this to the elderly, disabled, pregnant women, or obviously, children. This roughly leaves non-disabled, non-pregnant adults between 19–64. In some states, this is a small part of the Medicaid program, but in states that expanded Medicaid, this would impact most of the expansion group, unless otherwise excepted.

Each of these states made clear in their requests that there are a number of exceptions in place for non-qualifying disability, caring for a family member, etc. They also interpret “work” to include a number of other replacement activities — what CMS refers to as “community engagement activities” — this could include, but is not limited to: school, volunteering, job training, and stays in rehabilitation for certain conditions like substance use disorders.

There are three main issues with this guidance:

1. Legal basis. The only way to approve these program changes is under something known as a Section 1115 Demonstration. This is a waiver that grants the HHS Secretary broad authority to approve program deviations from the law insofar as it furthers the goals of the Medicaid program (CMS and HHS work closely together on this). Furthermore, the Secretary must make decisions based on evidence and process so the waiver does not appear to be granted in an “arbitrary and capricious” manner. CMS’ guidance today attempts to demonstrate that employment is a social determinant of health — i.e., employed people are more likely to have better health outcomes and therefore the Medicaid program will have better health outcomes if enrollees are employed. There is a myriad of things wrong with this assumption when applied to low-income populations and it is reasonable to expect lawsuits challenging this policy, once it is implemented.
2. Administrative challenges. Research has shown that continuous eligibility periods — i.e., removing roadblocks for eligibility renewals and placing them at less frequent intervals — improves health outcomes because continuity of care is improved. When there are more obstacles to enrollment, otherwise eligible individuals will lose coverage. CMS stated explicitly that they will not allow for program savings from attrition to be applied towards the costs of administration and oversight. IT systems changes and staff monitoring will cost each state money. It is difficult, on a massive scale, to collect the data needed in order to prove that someone qualifies for an exception, is working, is looking for work, or in a job training program or school. In fact, because of the administrative challenges, states have requested waivers from tracking work requirements for SNAP.
3. Effectiveness. The clear majority of Medicaid enrollees work, are in school or volunteering, or qualify for an exception. We know this from statistical research and from evaluations of similar attempts in Michigan. Medicaid cannot pay for job training programs, so states must also pay for those. Furthermore, research shows that while SNAP and TANF work requirements, in some cases, led to people getting low wage jobs, these were not sustained gains. — i.e., people got low-wage employment, but still lived in poverty.

It is also worth noting that several of these states also proposed that they be permitted to time-out Medicaid benefits in conjunction with work requirements. This was not addressed in CMS’ guidance.

CMS and HHS can set this federal policy and indicate that they are willing to approve these programs, but the real problem is that states want them. If you live in a state requesting one of these waivers, they are accountable for incurring additional costs and responding to public comments when they request a waiver. As of today’s letter, CMS says that includes ten states: Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, New Hampshire, North Carolina, Utah, and Wisconsin.

In conclusion, CMS and HHS have a difficult task ahead. In order to withstand legal challenges, they must balance their stated convictions that this is to help the Medicaid population with the evidence. States will also need to find a way to pay for these program changes.