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Medicaid Work Requirements Are Draconian and Harmful

Image via The Century Foundation

The theme of minimizing costs while improving outcomes through expanded access to care underpins discussions surrounding US healthcare infrastructure on both sides of the aisle. Under Biden, however, policymakers are working to undo the Trump Administration’s efforts to shrink access to Medicaid—thereby limiting the fiscal burden—through work requirements. By conditioning eligibility on potential recipients’ work status, up to 811,000 people would lose their Medicaid coverage after just 12 months, amounting to one third of the 2.5 million people subjected to new requirements. Because roughly half of the states could adopt Medicaid work requirements in the future, the Trump administration’s move could cause up to four million Medicaid adults to lose their benefits, and taking a note from history, it is likely those coverage losses will disproportionately fall on African Americans and individuals with chronic conditions. Given the risks posed by that impending reality—especially during a pandemic—Biden’s Executive Order on Strengthening Medicaid and the Affordable Care Act sought to intercept these policies by authorizing a federal reexamination of the extent to which they impermissibly encumber coverage and “otherwise undermine Medicaid or the ACA.” 

The problem is not just that restricting access deviates from the usual aims of Medicaid programs—Medicaid was designed to increase access by expanding coverage to eligible low-income children and adults without regard to employment status. But it is also that the Trump administration took a particularly unusual avenue to prevent Americans from receiving coverage: the Medicaid waiver program. Because Medicaid is structured as a federal-state partnership—with the federal government providing funds to states who tailor coverage and benefits for their needs—many layers of the program allow for inter-state flexibility and variation. State governments can apply to the Secretary of Health and Human Services (HHS) for permission to use Section 1115 demonstration waivers, and the supplied federal funding allows states to experiment with and evaluate new ways of administering and improving care. These waivers are approved by the Centers for Medicare & Medicaid Services (CMS) if they are budget neutral and if, according to the HHS Secretary, the demonstration is “in the public interest or promote[s] the objectives of title XIX.” 

It is undisputed that the aim of Medicaid in general, and Medicaid waivers specifically, is to improve access to or benefits of health care, with the subjacent goal of containing costs. That baseline assumption that any Medicaid waiver must actually better health and access to care is so widely accepted that even the Trump Administration’s rationale for work requirements needed to attempt to conform to it. Appealing to the second objective of Medicaid—to provide “rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care”—the Trump Administration argued that employment should be considered a form of rehabilitation that leads to financial independence. When HHS under Trump penned a letter encouraging state Medicaid Directors to pursue work-requirement waivers, the promoted Section 1115 demonstrations professed to test the claim that conditional coverage would improve health, employment, and incomes. This sneaky logic made it so that a policy aimed at restricting access was able to assume the guise of an initiative intended to improve health. 

The Trump administration’s attempt to use waivers as a way to set a work requirement for program eligibility is historically unprecedented: In over 50 years of prior policy work in this area, work has never been a condition of Medicaid eligibility. Significant state-to-state variation means that the shape of each state’s terms differ, but generally these requirements would demand that Medicaid-eligible adult beneficiaries work 80 hours a month; be looking for a job, enrolled in school, or engaged in certain approved volunteer activities; or be exempt for medical reasons, including pregnancy, parenthood, and caregiver duties. In effect, these waivers, and the requirements they impose, would restrict eligibility and limit available care; those who do not comply lose coverage, often within three months. 

As of September, six states already had a work requirement approved but not implemented, seven had a pending work requirement submitted, four states saw their work requirements at least temporarily blocked or set aside by the Courts, and two states’ experiments with work requirements were halted due to the pandemic. While it is important to note that judicial intervention, voluntary delays, and postponed integration mean that no state is currently implementing work requirements—and the Medicaid disenrollment freeze codified by the Families First Coronavirus Response Act means that no state can terminate Medicaid coverage for failure to comply with or disclose work status—the constitutionality of using Section 1115 waivers to condition enrollment in this way very much continues to hang in the balance.

While the Supreme Court recently took the debate surrounding work requirements off the docket—the legality of these waivers was to be determined in Azar v. Gresham, which was cancelled in response to calls from the Biden Administration—the Court notably did not issue a ruling with its cancellation, meaning that arguments could be rescheduled and the legitimacy of these policies remains unclear. Despite Biden’s explicit and implicit communication to state leaders that pending and future requests for work requirements will not be granted, and there is no question that his HHS Secretary can recall these demonstrations through the Federal CMS power to withdraw any waiver’s approval “at any time,” work requirement waivers are also only granted at the discretion of the sitting HHS Secretary, a political appointee. Thus, without comprehensively ruling on the unconstitutionality of work requirements, future administrations focused less on expanding coverage and more on cost-cutting could theoretically resurrect these waivers to undermine coverage for huge swaths of the nation. 

Ironically, the original intent of Medicaid was to supplement an insufficient Medicare program that failed to keep up with the lack of affordable health care options for the nation’s elderly and poor; Medicaid sought to expand coverage options to improve the health of the nation while simultaneously drawing costs down. As voiced by Biden’s acting Solicitor General Elizabeth Prelogar in her motion asking the Court to cancel its scheduled oral arguments in Azar v. Gresham, the arguments were no longer necessary because the Biden Administration had “preliminarily determined” that work-related requirements “would not promote the objectives of the Medicaid program.” The Biden Administration echoed that message in its letter to states with approved work requirements, expressing that these waivers would be withdrawn not only as a consequence of the pandemic, but also because their requirements “would not promote the objectives of the Medicaid program.” Indeed, this is not just a matter of differences in political opinion; from both a moral and utilitarian standpoint, these waivers are antithetical to the aims of Medicaid and should not be permitted to remain even questionable on Constitutional grounds. 

The Rawlsian concept of justice and notions of equal opportunity that underlie Medicaid programs reveal the flawed logic of work requirement waivers when viewed against a moral framework. Rawls’s idea of government, which is reflected throughout our Constitution, appeals to the principle of ensuring equality of opportunity. In today’s reality, universal access to at least baseline healthcare contributes to individuals’ ability to pursue opportunities, including work. Essentially, without good health, individuals cannot function normally, and they cannot work to support themselves or the economy at large. From that logic, providing universal, or at least expanded, access to public health and medical interventions meets the state’s obligation to protect the wellbeing of the individual and his ability to pursue freedom of opportunity. While protecting and promoting normal functioning is not the only factor affecting the range of opportunities open to people—income, education, employment, and basic liberties, among other things do as well—a population in poor health cannot also be a productive workforce. Health, viewed as normal function, is thus tightly bound with one’s range of available opportunities and access to employment. 

Given that healthcare policy largely turns on minimizing cost while maximizing outcomes, examining the utility of restricted access might better depict the harms of upholding exclusionary work requirements in practice. For one, we know from the Oregon Medicaid Experiment in 2014 that restricting access to care leads health to suffer: Expanding Medicaid increased the use of health services, including preventative care, which in turn precipitated better population health and elevated individual Health Related Quality of Life ratings. 

Beyond health outcomes, the move by the Trump Administration to restrict access to Medicaid through work requirements ironically also risked making the program more expensive for individuals and legislative budgets alike. Limiting access to Medicaid is fiscally hazardous no matter how you sketch it: As access to insurance decreases, outlays for uncompensated care—or care given by hospitals that uninsured individuals cannot pay for—increase. In other words, an enormous amount of money is lost when uninsured individuals seek care. When Medicaid access is expanded, on the other hand, hospitals are reimbursed at Medicaid levels, reducing costs to a state’s budget and increasing their bottom line. Medicaid expansion was associated with a 4.4 percent to 4.7 percent reduction in state spending as compared to traditional Medicaid, and in the average state, expansion generated sufficient savings to offset the cost of states’ traditional Medicaid programs entirely. In addition, in Oregon, expanding access to Medicaid critically decreased financial strain on individuals: it reduced medical debts sent to collection agencies, lowered the likelihood of borrowing money or skipping bill payments, and virtually eliminated catastrophic out-of-pocket medical expenditures. 

In addition, and perhaps most importantly, although work requirements purportedly aim to encourage employment, most adults on Medicaid who are able to work already do so, and those who are not working have good reasons: having an illness or disability, taking care of family, going to school, being unable to find a job, or being retired. In New Hampshire, for example, 97 percent of the group that would be affected by the state’s waiver program already met the work requirements or were exempt. At the outset, then, these waivers would struggle to effect any significant changes in workforce participation, as evidenced by the case of Arkansas: work requirements in Arkansas were not associated with increased employment during their short run of implementation. On the contrary, the loss of federal funding associated with waivers leads to budget-battles and job losses in practice, rather than increased employment.

Despite the fact that this population is overwhelmingly working, trying to work, or exempt, the vast majority of Medicaid beneficiaries who would lose eligibility run that risk simply because they are unable to comply with new rules, whether because they face systematic barriers to consistent employment or because they cannot navigate the procedural and administrative barriers of compliance. Indeed, the documentation processes associated with recording work status stand in the way of coverage for many eligible Americans, with some states requiring updated documentation on a monthly basis to maintain eligibility; in Kentucky and Indiana’s waivers, for example, enrollees would have to document and update information on an ongoing basis, making completion burdensome even for those who do not face other language or access barriers. 

On top of that, re-enrollment remains difficult for those who have erroneously lost coverage, with only 11 percent of those disenrolled in Arkansas reapplying for and regaining coverage. Even if those barriers to re-enrollment are eliminated–which is a big ‘if’–coverage gaps will grow and adversely affect health both on the individual and population levels: not only do individuals lack access to care, but funding for healthcare in general will shrivel to create losses for safety-net hospitals and community health centers. In terms of these waivers’ stated goal of improved health, the evidence indicates that work requirements clearly fall short: they cause significant coverage losses and erode national health.

The evidence stacked against the economic upside of these programs is equally strong: coverage loss fuels higher costs associated with deferred care, and the need to re-enroll with proof of work status creates unnecessary churn in the healthcare sector which is associated with higher administrative expenses and drives up state’s costs. Chiseling further into state budgets, implementation would likely demand increased spending on the expanded force of eligibility workers needed to process cases, slowing down the approvals process and leaving it liable to administrative errors. Both of those outcomes detract from the projected savings of waiver programs and result in eligible people being denied or losing coverage. 

Arkansas provides a tragic example of the above harms of testing work-requirements through 1115 waivers: in the six months that the work requirement was in place, more than 18,000 Arkansans lost their Medicaid coverage. A recent survey found that many lost coverage solely due to confusion about policies, with one-third of eligible people completely unaware of new requirements or the need to declare work status and only half actually reporting the work activities necessary for coverage. Research and enrollee focus groups show that 49% lost coverage exclusively due to communication failures and added administrative responsibilities associated with the new requirements. Conditioning enrollment on employment did not incentivize Arkansas enrollees to get a job or job training, work more hours, or participate in community engagement activities, but instead pushed them out of Medicaid and stymied coverage. In that outcome, neither objective of Medicaid was met: health suffered, employment was unchanged, and costs skyrocketed. 

Medicaid work requirements are thus not only inefficient, but run counter to the intent and principle of the program. Instead, both the Rawlsian moral and utilitarian arguments would be better answered by attempting to expand access as a means of bringing costs down. Federal CMS should thus continue exercising its authority to withdraw approval for work-requirement waivers and block future attempts at leveraging Section 1115 to restrict access on the grounds that they neither contribute to “the public interest [n]or promote the objectives of title XIX.” Likewise, in states where there is not active litigation, the Biden Administration will have to sift through the remaining demonstrations to determine whether the Secretary should withdraw approval of the state’s entire demonstration or just its anti-coverage clauses. So long as waivers remain constitutionally questionable, however, it is up to Biden’s CMS leaders to make their way through the list of waiver-seeking states; this leaves them unable to thwart states’ guaranteed right to appeal CMS’s federal determinations and without any assurance that this careful work will be endorsed by the next Executive. Regardless of partisanship, only honoring the intent of Medicaid expansion—covering more people—will bring down long term costs and improve national health, thereby increasing employment. This should be reflected in precedent, and the Supreme Court and Biden Administration should not leave open the possibility that another administration could use waivers as a means to restrict access to care.