Medicaid work requirements are coming. What will it mean for hospitals?

Read Advisory Board's take on how Medicaid work requirements could affect hospitals.

The Trump administration on Thursday sent a memo to governors that for the first time outlines how states could incorporate work requirements into their Medicaid programs for non-elderly, non-pregnant adults without disabilities.

The guidance comes after the Trump administration last year signaled interest in allowing states to add work requirements to Medicaid. The move marked a departure from the stance of former President Barack Obama's administration, which opposed Medicaid work requirements.

A controversial policy

Requiring work as a condition of Medicaid coverage has been controversial. Critics say that even those who do meet work requirements might lose coverage for failing to fulfil documentation requirements, the Washington Post reports. Stakeholders opposed to work requirements also point to research that has found most beneficiaries already work and that many who do not are ill or have disabilities, are caregivers, or are enrolled in school. The guidance issued Thursday requires states to exempt individuals with disabilities from the requirements and encourages states to provide exemptions or modifications to their requirements for several populations, including caregivers and students.

According to Kaiser Health News, Republicans have been calling for a work requirement for "able-bodied" Medicaid beneficiaries since the Affordable Care Act (ACA) allowed states to expand eligibility to individuals with incomes up to 138% of the federal poverty level. A Kaiser Family Foundation poll last year found that roughly 70% of U.S. residents support states using Medicaid work requirements.

According to CMS Administration Seema Verma, the guidance comes "in response to states that asked us for the flexibility they need to improve their programs and to help people in achieving greater well-being and self-sufficiency." At least 10 states are currently seeking CMS' permission to incorporate a work requirement into their Medicaid programs, KHN reports, including:

  • Arizona;
  • Arkansas;
  • Indiana;
  • Kansas;
  • Kentucky;
  • Maine;
  • New Hampshire;
  • North Carolina;
  • Utah; and
  • Wisconsin.

Officials in several other states have indicated interest in work requirements as well, KHN reports.

According to KHN, an HHS official familiar with the process said CMS may approve Kentucky's Medicaid waiver as early as Friday. (Verma, who worked on Indiana's and Kentucky's waivers before becoming CMS administrator, has recused herself from decisions on those waivers[BH1] , KHN reports.) If the Trump administration approves a state Medicaid work requirement request, it would be the first time in Medicaid's history, according to Politico Pro.

Guidance details

CMS in the guidance describes what it will look for when it considers state Section 1115 Medicaid demonstration waivers that seek to add work and community engagement requirements to state Medicaid programs. To receive a waiver, which states file when seeking approval to depart from Medicaid's standard rules, a state must provide compelling evidence that their demonstration would "further the objectives of Medicaid."

In the guidance, CMS specified that Medicaid demonstration waivers seeking to establish work and community engagement requirements—such as job training or volunteer work—"should be designed to promote better mental, physical, and emotional health in furtherance of Medicaid program objectives." CMS added, "Such programs may also, separately, be designed to help individuals and families rise out of poverty and attain independence, also in furtherance of Medicaid program objectives."

Specifically, CMS listed several "considerations" that it thinks "will facilitate states' work" on their proposals and help CMS with its "oversight and fiduciary responsibilities." Namely, CMS said states should:

  • Acknowledge and address in their application market forces and structural barriers that can impede employment and outline in the application how the state plans to address these issues;
  • Align Medicaid work requirements and those other programs, such as Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program;
  • Clearly identify the groups to whom the requirements apply and consider submitting proposals that target specific subpopulations within eligibility groups; and
  • Offer assistance to help beneficiaries meet the requirements—though Medicaid funding cannot be used for this purpose.

In addition, CMS said states must create plans to monitor their programs and regularly submit monitoring reports that describe progress on the program.

Exceptions, modifications

CMS in the guidance said requirements should apply to "able-bodied" adults—and should exempt pregnant women, individuals with disabilities, those deemed "medically frail" due to a medical condition, the elderly, and children. The agency also said states "should consider a variety of activities to meet the requirements for work and community engagement" for Medicaid beneficiaries in areas with high rates of unemployment and for those "engaged as caregivers for young children or elderly family members."

Further, CMS acknowledged the impact of the opioid misuse epidemic and said states must ensure that individuals with substance use disorders can access appropriate Medicaid coverage and treatment services. To do this, CMS said states could modify the work requirements to allow time an individual spends in treatment to count toward work/community engagement requirements.

Opposition expected

If a state's request to add work requirements is approved, it will likely spur a legal challenge from patient advocacy groups concerned that the requirement would run counter to Medicaid' objectives and would necessitate an act of Congress, KHN reports.

Leonardo Cuello, health policy director at the National Health Law Program, said once a state gains approval, his group "would be looking very, very closely to the legal options." He called the idea that work promotes health "totally contorted." He added, "It's a little like saying that rain causes clouds."

Separately, Matt Salo, executive director of the National Association of State Medicaid Directors, whose members have a range of views on the topic, said, "This is going to go to court the minute the first approval comes out" (Politico Pro, 1/11 [subscription required]; Galewitz, Kaiser Health News, 1/11; Abutaleb, Reuters, 1/11; Goldstein, Washington Post, 1/11; Alonso-Zaldivar, AP/Sacramento Bee, 1/11; CMS memo, 1/11).

Advisory Board's take

by Yulan Egan, Health Care Advisory Board, and Trevor Goldsmith, Financial Leadership Council

The net result of work requirements will almost certainly be fewer individuals on the Medicaid rolls, so providers in states seeking work-requirement waivers are justified in worrying about a potential uptick in the uninsured rate and increases in uncompensated care.

Having said that, the guidance released by CMS suggests that the impact of work requirements could face several notable limitations. Children—who alone constitute half of Medicaid beneficiaries—along with pregnant, elderly, or disabled beneficiaries will likely be excluded. CMS encourages a focus instead on able-bodied adults; i.e. the Medicaid expansion population. CMS also suggests that states should consider aligning exemptions to work requirements with those already in place under their TANF [Temporary Assistance for Needy Families] and SNAP [food stamp] programs. That might encourage states to grant additional exemptions to groups such as primary caregivers, full-time students, and those who have health-related barriers to employment.

In addition to the exemptions suggested in CMS’s guidance, it’s also worth noting two additional limiting factors on the impact of Medicaid work requirements. First, they are highly unlikely to be implemented in Democratic-led states. And second, many Medicaid beneficiaries already work. An analysis by the Kaiser Family Foundation, for example, found that among Medicaid beneficiaries that did not qualify Supplemental Security Income, 59% were already working.

Nonetheless, provider organizations are not wrong to be concerned about the negative impact on coverage stemming from work requirements. Previous experience has also shown that increasing the administrative burden of signing up for Medicaid coverage—something that work requirements would undoubtedly do—reduces program participation even for individuals who are eligible for coverage. Many hospitals already play an important role in maximizing enrollment in Medicaid today. For those in states considering work requirements, investment in financial navigation services will be even more important moving forward. And with the potential for increases in the uninsured rate, investment in care management resources and community partnerships will be crucial for maintaining access to preventive care and minimizing avoidable use of the emergency department.

We'll be discussing Medicaid strategy for hospitals and health systems in more depth at this year's Health Care Advisory Board national meeting. Register now to secure your spot today.

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