January 16, 2018

Kentucky gets OK to implement Medicaid work requirements—but opponents eye legal challenges

Daily Briefing

    CMS on Friday approved Kentucky's waiver request to implement work requirements for some of the state's Medicaid beneficiaries, making Kentucky the first state to receive federal approval to impose such requirements.

    The waiver also eliminates retroactive eligibility for most Kentucky Medicaid beneficiaries, under which the program had paid medical expenses that individuals incurred up to three months prior to their initial Medicaid application if they would have been eligible for the program during that period. Pregnant women and former foster care youth will be the only populations eligible for retroactive eligibility under the waiver.

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    The approval comes after CMS on Thursday sent a memo to governors that outlined how states could incorporate work requirements into their Medicaid programs. According to Modern Healthcare, CMS in a letter approving Kentucky's waiver signaled it will approve similar requests from other states.

    Waiver details

    About 1.4 million Kentucky residents are enrolled in Medicaid, including about 400,000 who received coverage due to the state's Medicaid expansion under the Affordable Care Act (ACA).

    Kentucky under the waiver will implement a demonstration program called Kentucky Helping to Engage and Achieve Long Term Health, or Kentucky HEALTH. The program will impose new cost-sharing requirements and offer incentives to encourage beneficiaries to adopt healthy behaviors.

    Under the program, the state will create so-called "rewards" accounts for Medicaid beneficiaries. Beneficiaries will be able to earn "rewards" funding through various actions, such as completing a disease management class, volunteering, or receiving job training. Beneficiaries will be able to use the funds to purchase dental or vision benefits or over-the-counter medications, or to offset the costs of a gym membership. The state will withdraw funding from a beneficiary's rewards account if he or she seeks non-emergency care at an emergency department. According to Modern Healthcare, the state under the program will not cover emergency transportation services.

    Further, beneficiaries under the program will be required to make monthly premium payments ranging from $1 to $15. Coverage for pregnant women and for children will not be subject to the premium requirements.

    The state under the program will be able to terminate coverage for individuals with incomes higher than the federal poverty level (FPL) who do not make required premium payments for 60 days. Such individuals will be locked out of Medicaid coverage for six months, but could have their coverage reinstated if they pay the two missed premiums and make one additional premium payment. Those individuals also will be required to take a financial or health literacy course to have their coverage reinstated. Beneficiaries with incomes below FPL will be required to make copayments if they fail to pay their premiums. The state also can suspend such individuals' rewards accounts.

    The state under the program also will require Medicaid beneficiaries whose employers offer health insurance benefits to switch to their employer-sponsored benefits. The state will cover any benefits lost during the transition.

    Kentucky under the program also will require able-bodied adults without dependents to participate in job training or community engagement, such as volunteer work, in order to remain eligible for Medicaid. Affected beneficiaries will have to work or volunteer for at least 20 hours per week to meet the requirements.  Overall, able-bodied adults under the program would to have engage in so-called "employment activities" for a minimum of 80 hours a month.

    The work requirements will not apply to Medicaid beneficiaries who are:

    • Full-time students;
    • Medically frail;
    • Pregnant;
    • Primary caregivers of a dependent, including children and disabled adults; or
    • Younger than 19.

    The state under the program also will lock individuals out of Medicaid coverage for up to six months if they fail to notify state officials of a new job or income.

    According to the waiver, Kentucky will launch the new program on July 1, but beneficiaries will not be able to begin earing credits for their rewards accounts until April 1. CMS approved the waiver to run through Sept. 30, 2023.

    Implications

    State officials have projected the waiver could reduce Medicaid enrollment by as much as 95,000 and reduce state spending by $358 million by 2021, though Kentucky Medicaid Commissioner Stephen Miller said the state likely will not see any savings from the waiver for the next two years. According to CQ News, the waiver overall could save Kentucky an estimated $2.4 billion over five years.

    State officials estimated that the work requirements will affect nearly 200,000 beneficiaries who gained coverage under the state's Medicaid expansion.

    Kentucky Gov. Matt Bevin (R) said the state's Medicaid program under the waiver will serve as a "model for the nation."  At least nine states are currently seeking CMS' permission to incorporate a work requirement into their Medicaid programs, including:

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

    Reaction

    Trump administration officials and Bevin touted the waiver's approval, while some legal experts said they are considering challenging the new work requirements in court. 

    CMS Administrator Seema Verma, who recused herself from the Kentucky decision due to her involvement in crafting the plan as a consultant, said, "There's countless studies out there that show the link of having a job and positive health outcomes."

    However, some lawmakers and industry experts criticized the move. For instance, Rep. John Yarmuth (D-Ky.) in a statement said, "By approving … Bevin's dangerous and irresponsible Medicaid waiver the Trump administration has agreed to end health coverage for 95,000 Kentuckians." Yarmuth said Bevin is "sabotaging" the state's Medicaid expansion "by raising premiums for families who can't afford them and creating new barriers to coverage."

    Dustin Pugel, a policy analyst at the Kentucky Center for Economic Policy, in a statement said, "New barriers to getting covered and new ways of getting kicked off coverage will hurt working Kentuckians, health care providers and our economy."

    According to Kaiser Health News, some opponents of the waiver argue that federal Medicaid law does not allow states to implement work requirements and other provisions included in the waiver.

    For instance, Leonardo Cuello—director of health policy at the National Health Law Program, which is considering filing a lawsuit against Kentucky over the waiver—said work requirements on Medicaid beneficiaries "are illegal and not permissible under law."

    According to Reuters, the Southern Poverty Law Center also has said it plans to challenge the waiver in court (Abutaleb, Reuters, 1/12; Dickson, Modern Healthcare, 1/12; Yetter, Louisville Courier Journal/USA Today, 1/12; Galewitz/Bartolone, Kaiser Health News, 1/12; Williams, CQ News, 1/12 [subscription required]; Goodnough, New York Times, 1/12).

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