February 26, 2018

Several states are seeking Medicaid work requirements—but experts say they could be costly

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    Experts say states will have to spend tens of millions of dollars to implement work requirements and other changes proposed in recent Medicaid waivers.

    Learn more: Get profiles of state-level Medicaid transformation

    Background

    According to CQ News, states seeking federal permission to implement a Medicaid waiver must demonstrate that the changes will not cost the federal government more than their existing Medicaid programs, but states do not have to include administrative costs, such as hiring and technology updates, in their calculations. Experts have said technology-related upgrades and personnel hiring are two of the major costs associated with implementing changes to a state's Medicaid program.

    However, states are eligible to receive a federal match for administrative costs related to the changes. For instance, Matt Salo, executive director of the National Association of Medicaid Directors, said states often receive a 50% match, but can sometimes receive up to a 90% match, from the federal government for the cost of developing IT systems.

    But CMS in a letter sent last month to state Medicaid directors wrote that it would not help states pay for "job training or other employment services, child care assistance, transportation, or other work supports to help beneficiaries prepare for work or increase their earnings," which, according to Governing, indicates states will have to cover a large portion of the costs associated with implementing Medicaid changes themselves.  

    Experts, states say Medicaid program changes will cost millions

    According to Governing, experts have said states implementing Medicaid waivers that impose work requirements and other changes—such as coverage limits, eligibility checks, monthly income reports, and premiums—most likely will have to update their current IT systems or create new systems to maintain Medicaid beneficiaries' data. Jennifer Wagner, a senior analyst at the Center on Budget and Policy Priorities (CBPP), said, "I don't know if states realize how fundamentally they'll have to change their eligibility systems," and estimated that states might have to spend "tens of millions of dollars" to do so.

    In addition, experts have said states will have to train their existing staff on the changes and hire additional staff to track appeals and compliance.

    Virginia Gov. Ralph Northam (D) last week released data showing it would cost the state about $100 million over two years to implement Medicaid work requirements, according to Governing.

    Elsewhere, Kentucky Gov. Matt Bevin (R) has estimated that changes the state plans to make to its Medicaid program could cost the state about $187 million in administrative costs during the first six months of implementation, CQ News reports. Bevin said the costs will include developing electronic systems and other changes to help the state track premium payments, work hours, and other requirements under Kentucky's recently approved Medicaid waiver. According to a revised state budget for fiscal year 2018, the federal government will cover more than $167 million of the administrative costs, CQ News reports. Further, Kentucky officials have estimated that the changes the state will implement under the waiver will generate $2.4 billion in savings for the state and federal government over five years.

    In Arkansas, Gov. Asa Hutchinson (R) said the state "carefully evaluated how the implementation of [proposed] work requirement[s] would impact [its] budget," and the state "found an efficient way to administer the program through our existing online application site." Hutchinson said the state "do[es] not anticipate adding staff to implement the program."

    Jeff Myers, president and CEO of Medicaid Health Plans of America, said states could cut spending in other areas to cover added expenses related to the Medicaid changes.

    Similarly, Wagner said, "Our serious concern here is that [states] are shifting spending from health care for needy families to administrative bureaucracy and contracts with private vendors, and leaving families without access to health care" (Baker, "Vitals," Axios, 2/21; Quinn, Governing, 2/19; Williams, CQ News, 2/22 [subscription required]).

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