June 01, 2018

The New Work Requirement for Medicaid

Olivia Obasi, McDermott Will & Emery, Washington, DC

The Centers for Medicare & Medicaid Services (CMS) on January 11, 2018 announced a new policy that would allow states to impose work as a requirement for Medicaid eligibility.1 Under the new policy, “work” is also referred to as community engagement and includes employment, volunteering, job search or job training programs; beneficiaries would be required to work 20 hours per week.2 Pregnant women, the disabled, the elderly, the medically frail and children are exempted.3

Following the announcement, a debate has sparked off across the nation both in favor and against this policy. Implementation of the policy will likely cause disenrollment from Medicaid.4 Including a work requirement in Medicaid may help beneficiaries attain more financial independence and reduce burdens on the Medicaid program. However, as Medicaid is a program intended to help people address their health, which could impact their ability to secure and retain jobs, the new work requirement may trigger unintended problems.5

Medicaid was established in 1965 as a health insurance program for low-income people. It is jointly funded by the state and federal government and provides health coverage to more than 70 million Americans.6 Section 1115 of the Social Security Act gives the Secretary of Health and Human Services (HHS) broad authority to grant waivers for state demonstration projects that “promote the objectives of the Medicaid program.”7 The Obama Administration, through the Patient Protection and Affordable Care Act (PPACA), expanded Medicaid to include individuals who previously did not qualify.

The work requirement is a landmark and a major change in policy as it is the first time since the establishment of Medicaid that work is set as criteria for eligibility.8 The Obama administration in 2015 rejected Indiana’s application to impose a work requirement for Medicaid because it was determined that work would be inconsistent with the objectives of the program 9 as required under Section 1115.10

A recent study by the Kaiser Family Foundation shows that a majority of adult Medicaid enrollees (six in ten) are already working.11 The study also explored the causes of “not working” of those non-disabled non-elderly adults. Most of them either reported that they are caregivers, attend school or have an infirmity (all of which could qualify them for exemption under the new policy). Only seven percent of the non-working population did not fall into any of the exemption categories.12

Currently, Kentucky,13 Indiana,14  Arkansas15 and New Hampshire16 have had their waiver applications allowing them to impose the work requirement on Medicaid beneficiaries approved. Six other states -- Arizona, Kansas, Maine, Mississippi, Utah and Wisconsin -- have pending applications.17

This article will address the pros and cons of the policy, how states are implementing it, and the lawsuit against it.

The Case for Work Requirement

Proponents of the new policy argue that the expansion of Medicaid pursuant to PPACA to nonelderly childless adults includes many who could be working and that it is important that those who receive public assistance give back to society in some way.18 Prior to PPACA, only low-income adults with children, adults with disabilities and low-income children qualified for Medicaid. PPACA allowed states to expand Medicaid to non-elderly adults with incomes below 138 percent of the Federal Poverty Level. Thirty-one states and the District of Columbia opted for expansion.19 The population of people that would be affected by the work requirement will be mainly the PPACA expansion group/nontraditional eligibles. It is estimated that 47 million Americans were uninsured prior to PPACA, and about 20 million gained coverage because of the expansion.20

Proponents of the work requirement policy, many of whom are also critics of the Medicaid expansion, argue that the increase in Medicaid enrollment will put a severe financial strain on states’ budgets, and that the work requirement will help curtail the soaring Medicaid enrollment.21 Medicaid accounts for a major percentage of the Gross Domestic Product (GDP).22 In 2016, Medicaid spending grew 3.9 percent to 565.5 billion.23  For example, in Florida, “Medicaid is the fastest growing part of the state budget increasing at more than 3.5 times the rate of the general revenue.”24

Proponents are also of the view that the work requirement policy will make it more likely for beneficiaries to attain financial independence in the long run as opposed to continued reliance on government aid.25 Proponents liken the new policy to the Welfare Reform Act of 1996, also known as Personal Responsibility and Work Opportunity Act (PRWORA), which overhauled that program. In a study examining the effects of the PRWORA on poverty, the Manhattan Institute26 found that the inclusion of a work requirement led to substantial reductions in poverty nationwide.27 The study adduced examples of successful work requirement reforms. For instance, under the Temporary Assistance for Needy Families (TANF) program, which increased single mother labor force participation and lowered single mother and child poverty rates, the enforcement of time limited restrictions for unemployment compensation enabled 2.1 million people to obtain jobs and get off welfare.28

The Case against Work Requirement

The new Medicaid work requirement however, differs radically from the 1996 welfare overhaul. The 1996 welfare overhaul was based on a “reciprocal obligation” between the government and beneficiaries.29 Beneficiaries were obligated to take steps towards securing gainful employment while states were obligated to provide supportive services such as job training, transportation and childcare that may be necessary in helping beneficiaries meet the requirements.30 For example, under TANF states have broad flexibility in how TANF funds are spent and are required to report their expenditure quarterly to the Administration for Children and Families (ACF).31 The Fiscal Year (FY) 2015 national data show that states spent about 15 percent of TANF funds on basic assistance to beneficiaries such as child care and work, education, and training activities.32 In contrast, under the new  Medicaid work policy, the onus to satisfy the work requirement is mostly on beneficiaries. In the memo from CMS announcing the demonstration waiver, states are explicitly prohibited from “using federal Medicaid funds to pay for necessary supportive services.”33 Those against the new Medicaid work policy argue that in the absence of the mutual obligation, the policy may ultimately translate to a barrier to healthcare access.

Those opposed to the policy also argue that the work requirement expected to result in disenrollment from Medicaid,34 which may cause health disparities. It has been shown that lack of access to healthcare has significant health and financial consequences that could result in reduction in the workforce and death from preventable/treatable diseases.35 A study by the Harvard T.H. Chan School of Public Health found that Medicaid expansion in Arkansas and Kentucky is linked to better health outcomes for low-income adults.36  The study also shows that there was more access to primary and preventive care, consequently fewer Emergency Room visits and better managed care of chronic diseases such as diabetes and high blood pressure.37

The work policy may increase the burden on safety net institutions because the uninsured rate would go up as a result of disenrollment from Medicaid. Research shows that the states that expanded Medicaid under PPACA saw significant reduction in uncompensated care and improved financial status of safety net institutions.38

The work policy will result in new compliance obligations for beneficiaries, and the increased administrative burden may have adverse consequences for those who are not able to navigate the system. For example, under TANF beneficiaries with poor health who are unable to “navigate the welfare system are likely to lose benefits.”39

Opponents of the work policy also fear that it may have an adverse impact on public health. According to a Medicaid expert, “[t]aking away health care from people will create public health threat especially in the poorest communities who depend on Medicaid as a source of health care.”40

Approval of the Work Requirement Demonstration Waiver in Kentucky, Indiana Arkansas and New Hampshire

On January 12, 2018 Kentucky became the first state to gain approval for the demonstration waiver. The waiver is expected to go into effect in July 2018, and it is estimated that 95,000 people in that state will lose Medicaid coverage within the first five years.41 Beneficiaries would be required to make monthly premium payments based on income and those whose payments are not up to date would be suspended from the program for six months. Adult beneficiaries between 19 and 64 years of age will be required to work a total of 80 hours a month.

Indiana is the second state to gain approval for the work requirement demonstration waiver, which will go into effect in 2019.42 The demonstration waiver, which was approved on February 1, 2018, mandates adult enrollees to work an average of 20 hours a week and exempts adults 60 years and older. Under the work requirement, beneficiaries who fail to promptly complete the eligibility redetermination process will be locked out from the program for three months.43 In both Indiana and Kentucky, former foster-care youth, pregnant women, primary care givers, full-time students, the disabled and the medically frail are exempted.44

On March 5, 2018 CMS approved Arkansas’ work demonstration waiver. The policy will be rolled out in stages. Starting in 2018, enrollees ages 30 to 49 years will be required to work 80 hours a month, and in 2019 the requirement will be extended to enrollees between 19 to 29 years.  Enrollees who fail to meet the requirements within three months of a plan year will be barred from re-enrolling until the following year.45

New Hampshire on May 7, 2018 became the fourth state to gain approval to implement the work requirement waiver. Effective January 1, 2019, able bodied individuals between the ages of 19 to 64 years would be required to work at least 100 hours per month as a condition of Medicaid eligibility. Caregivers, people with disabilities, the medically frail and parents of children under six years of age are exempted.46

First Legal Challenge: Stewart et al v. Hargan et al

On January 24, 2018 a class action lawsuit was filed in District of Columbia federal court to challenge the implementation of the policy in Kentucky. The plaintiffs are suing both individually and on behalf of a statewide class of persons similarly situated (all residents of Kentucky who are enrolled in Kentucky Medicaid program on or before January 12, 2018) pursuant to Federal Rule of Civil Procedure 23(a) and (b)(2). The plaintiffs allege that they would be in danger of losing health coverage when the policy takes effect and are asking the court to declare the policy unlawful. The plaintiffs are also asserting that the defendant (the HHS Secretary) acted beyond the scope of his authority under Section 1115 waiver authority.47  The defendants filed a Motion to Transfer, asking the court to transfer the case to the Eastern District of Kentucky pursuant to 28 U.S.C. S 1404(a).48 On April 10, 2018 the court denied the motion and ruled that convenience and the interest of justice warrant keeping the matter in the District of Columbia.

Conclusion

The new Medicaid work policy is a relatively untested one that may have repercussions on health but may also spur people to obtain needed employment. The administrative burden/complexity of implementing the policy could also be a plus, as it may make it harder to defraud the system. It is imperative that states cautiously deliberate on the totality of the cost of this undertaking before opting to impose the work requirement. Case law could affect what direction this takes.

  1. Department of Health and Human Services (2018), Opportunities to promote work and community engagement among Medicaid beneficiaries, https://www.medicaid.gov/federal-policy-guidance/downloads/smd18002.pdf.
  2. See id, at page 3.
  3. See id, at page 3.
  4. See id at page 8.
  5. Hahn, H., Kenney, G. M., Allen, E. A., Burton, R. A., and Waxman E. (2018), Guidance on Medicaid Work and community engagement requirements raises many important questions, Urban Institute, https://www.urban.org/research/publication/guidance-medicaid-work-and-community-engagement-requirements-raises-many-important-questions.
  6. Kaiser Family Foundation (2017), Medicaid state fact sheet, https://www.kff.org/interactive/medicaid-state-fact-sheets/.
  7. Social Security Act Sec. 1115. [42 U.S.C. 1315] (a) (1).
  8. Scott, D., (2018), The Trump Administration’s plan for Medicaid Work Requirements explained, Vox Media, https://www.vox.com/policy-and-politics/2018/1/11/16877916/medicaid-work-requirements-trump-guidance.
  9. Indiana’s Medicaid expansion, approved in part, with work requirement rejected, Centers for Medicare & Medicaid Services, (January 27, 2015) CMS and Indiana agree on Medicaid expansion, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-01-27.html.
  10. Social Security Act Sec. 1115. [42 U.S.C. 1315] (a) (1).
  11. Musumeci, M., Garfield, R., and Rudowitz, R. (2018), Medicaid and work requirements: new Guidance, state waiver details and key issues, https://www.kff.org/medicaid/issue-brief/medicaid-and-work-requirements-new-guidance-state-waiver-details-and-key-issues/. (The study does not indicate whether those working are working the requisite number of hours required by the policy).
  12. See id.
  13. Centers for Medicare & Medicaid Services, (January 12, 2018), Letter to governor of Kentucky, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ky/ky-health-ca.pdf.
  14. Centers for Medicare & Medicaid Services, (February 1, 2018), Letter to Indiana Medicaid Director, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/in/Healthy-Indiana-Plan-2/in-healthy-indiana-plan-support-20-ca.pdf.
  15. Centers for Medicare & Medicaid Services, (March 5, 2018), Letter to governor of Arkansas, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ar/ar-works-ca.pdf.
  16. Centers for Medicare & Medicaid Services, (May 7, 2018), Letter to New Hampshire Medicaid Director, https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/nh/nh-health-protection-program-premium-assistance-ca.pdf.
  17. Kaiser Family Foundation, (May8, 2018), Medicaid Waiver Tracker, Which states have approved and pending Section 1115 Medicaid Waivers? https://www.kff.org/medicaid/issue-brief/which-states-have-approved-and-pending-section-1115-medicaid-waivers/.
  18. Gitis, B., O’Neill Hayes, (2017), The Value of introducing work requirements to Medicaid, American Action Forum, https://www.americanactionforum.org/research/value-introducing-work-requirements-medicaid/.
  19. Galewitz, P. (2018), Trump administration clears way to force some Medicaid enrollees to work, California Healthline, https://californiahealthline.org/news/trump-administration-clears-way-to-require-work-for-some-medicaid-enrollees/.
  20. Bowen, G., Gangopadhyaya, A., & Dorn, S. (2016), Who gained health insurance coverage under the ACA, and where do they live? Urban Institute, https://www.rwjf.org/content/dam/farm/reports/issue_briefs/2016/rwjf433497.
  21. Glans, M., (2017), Research & commentary: States pursue work requirement for Medicaid, The Heartland Institute, https://www.heartland.org/publications-resources/publications/research--commentary-states-pursue-work-requirements-for-medicaid.
  22. Centers for Medicare & Medicaid Services, (February 14, 2018), NHE Facts Sheet, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.
  23. See id.
  24. Scott, R. (July 24, 2012), Medicaid expansion would strain state’s budget. Florida News.  https://www.usnews.com/debate-club/is-medicaid-expansion-good-for-the-states/medicaid-expansion-would-strain-state-budgets.
  25. Gitis, B., O’Neil Hayes, T. (2017), The value of introducing Work requirements to Medicaid, American Action Forum, https://www.americanactionforum.org/research/value-introducing-work-requirements-medicaid/ Glans. See also supra, note 18.
  26. The Manhattan Institute is a conservative 501(c)(3) nonprofit American think tank focused on domestic and urban affairs. See https://www.manhattan-institute.org/.
  27. Winship, S. (2016), Poverty after welfare reform, (page 8), The Manhattan Institute, https://www.manhattan-institute.org/sites/default/files/R-SW-0816.pdf.
  28. See id page 8.
  29. Altman, D., (2018), Why Medicaid work requirements aren't the same as welfare reform, Kaiser Family Foundation,    https://www.axios.com/medicaid-work-requirements-welfare-reform-1516718792-473124da-0451-4c4f-8359-77069043b984.html.
  30. See id.
  31. Department of Health & Human Services, Office of Family Assistance (August 15, 2016) State TANF spending in FY 2015, https://www.acf.hhs.gov/ofa/resource/state-tanf-spending-2015-factsheet.
  32. See id.
  33. See supra note 1 at page 7.
  34. See supra, note 1 at page 7.
  35. Villani, J., and Mortensen, K. (2013), Nonemergent emergency department use among patients      with a usual source of care, Journal of the American Board of Family Medicine, 26(6):680-91, doi: 10.3122/jabfm.2013.06.120327.
  36. Sommers, B., D., Blendon, E., Orav., J., Epstein, A, M., (2016), Changes in Utilization and    Health Among Low Income Adults After Medicaid Expansion or expanded private insurance, The Commonwealth Fund, http://www.commonwealthfund.org/publications/in-the-literature/2016/aug/changes-utilization-health-low-income.
  37. See id.
  38. Villani, J., and Mortensen, K. (2013), Nonemergent emergency department use among patients with a usual source of care, supra note 35.
  39. See supra, note 11.               
  40. Rosenbaum, S., and Wachino, V. (2018), Unpacking the Trump Administration's Section 115 Medicaid work demonstration solicitation, Health Affairs, https://www.healthaffairs.org/do/10.1377/hblog20180113.747190/full/.
  41. Luhby, T. (March 5, 2018), Thousands of Arkansas Medicaid recipients must start working in June, http://money.cnn.com/2018/03/05/news/economy/arkansas-medicaid-work-requirements/index.html.
  42. Galewitz, P. (2018), Indiana adds work requirement in Medicaid, will block coverage if paperwork is late, National Public Radio Inc, (US), https://www.npr.org/sections/health-shots/2018/02/02/582828039/indiana-adds-work-requirement-to-medicaid-will-block-coverage-if-paperwork-is-la.
  43. Williams, M., (2018), More states jump on Medicaid work requirements bandwagon, Roll Call, https://www.rollcall.com/news/policy/states-jump-medicaid-work-requirements-bandwagonss.
  44. See id.
  45. See supra note 15 at page 1.
  46. See supra note 16 at page 2.
  47. Stewart et al v. Hargan et al, Case 1:18-cv00152-JEB (January 24, 2018), District of Columbia District Court.
  48. See Motion to Transfer 2 n 2, Stewart et al v. Hargan et al, Case 1:18-cv00152 – Document 42 (D.D.C. 2018)

Olivia Obasi

McDermott Will & Emery

Olivia Obasi is a project attorney with McDermott Will & Emery in Washington, D.C., and concentrates her practice on corporate and compliance matters affecting the healthcare industry. She assists clients with regulatory compliance issues and general business transactions. Ms. Obasi also has a Health Policy Certificate from the George Washington University School of Public Health. She may be reached at olivia.obasi@gmail.com.