Perspective: The harmful, unintended consequences of state Medicaid waivers

The Trump administration’s policy of letting states take Medicaid coverage away from beneficiaries who don’t meet rigid work requirements will mean large coverage losses, worse access to care, and reduced financial security for people who can’t meet the requirements. But that’s not all. What isn’t widely recognized is that many people who should remain eligible for Medicaid — because they’re working or qualify for an exemption — will also lose coverage.

The Centers for Medicare and Medicaid Services (CMS) has approved proposals for Medicaid work requirements in Kentucky, Indiana, Arkansas, and New Hampshire, and more states have proposals pending with CMS or under discussion. A federal court recently blocked Kentucky’s plan because CMS failed to address how the waiver could be consistent with Medicaid’s goal of providing coverage, particularly given Kentucky’s estimate that 95,000 people would lose coverage as a result. CMS reopened the waiver proposal for public comment and will likely issue a new approval in the coming months.

Based on studies on the impact of paperwork and procedural barriers in Medicaid, the Kaiser Family Foundation estimates that 5 to 15 percent of beneficiaries who are meeting the requirements or should qualify for an exemption will lose coverage due to Medicaid work requirements. That’s a large group.  Over 60 percent of Medicaid beneficiaries under age 65 who don’t qualify for disability benefits are working (though not all are able to find enough hours each month to satisfy work requirements, as discussed below). Another 32 percent are in fair or poor health, taking care of family members, or in school — factors that would likely qualify them for an exemption.

States will face an array of challenges to implement and administer work requirements, and beneficiaries will have to understand complex rules and jump through hoops to stay covered. For example, beneficiaries who are working or engaged in other qualifying activities will have to understand which activities qualify, how to document their hours, and how many hours they must complete (which varies in some states based on how long someone has been enrolled in Medicaid). And they must report compliance according to the state’s rules, often on a tight deadline. In Arkansas, which began phasing in its work requirement in June, only 445 of the 8,000 beneficiaries required to report their compliance with the new rules — less than 6 percent — successfully logged their hours that month.

Beneficiaries who should qualify for exemptions to work requirements will face a separate set of challenges, beginning with understanding the criteria. For example, all states must exempt enrollees who are “medically frail,” but how states interpret this and similar terms such as “serious and complex medical condition” may be hard for beneficiaries to understand. They’ll also have to get documentation to prove they’re exempt, sometimes report sensitive health information to state caseworkers (regarding a substance use disorder, for example), and submit documentation in accordance with state rules.

Certain vulnerable groups are particularly ill-equipped to cope with more red tape. That’s partly why, in other federal programs with work requirements, people with physical disabilities, mental health needs, and substance use disorders are disproportionately likely to lose benefits even though many should qualify for exemptions.

Coverage losses also will occur due to state errors. Notably, Kentucky and Arkansas, two states with new waivers, have struggled to implement other major policy and systems changes in their Medicaid programs, causing tens of thousands of people to lose coverage.

In addition to losing coverage due to red tape, many working people will lose coverage because they can’t work the required number of hours every month. Most Medicaid beneficiaries work in unstable jobs in which hours fluctuate and illnesses, family emergencies, child care or transportation challenges can cost people their jobs. Lacking sick leave, a working mother could lose her job if she or her child becomes ill.  With a work requirement, she could also lose her health coverage.

Nearly half of low-income working people who could face Medicaid work requirements could lose coverage under an 80-hour per-month standard (as most states are proposing), according to estimates from the Center on Budget and Policy Priorities, where I work. Even among those working at least 1,000 hours per year, or 80 hours a month on average, 25 percent would fall short at least one month a year.

We have better ways to help people find steady work, including high-quality job training, child care, affordable transportation, and a decent minimum wage. None of those policies would cause people with disabilities and serious health needs and working people to lose coverage. For example, a promising Montana program focuses on reducing barriers to work rather than creating new bureaucracy to track enrollees’ employment and exemption information. States should pursue those policies, not take health coverage away from those who need it most.