Does Medicaid work with a work requirement?

Conditioning Medicaid eligibility on a work requirement could adversely affect beneficiaries from accessing needed health coverage in a manner that is contrary to the program’s purpose—providing health coverage. A Kaiser Family Foundation (KFF) issue brief examined the policy arguments related to Medicaid work requirements and the likely impacts of such requirements, in light of a March 14, 2017, CMS letter to state governors announcing that it will begin to use Section 1115 Medicaid expansion waivers to approve provisions related to “training, employment, and independence.”

Work requirements 

In the past several years, CMS has denied multiple requests to include work requirements as a condition of Medicaid eligibility. Those requests were made as part of states’ Section 1115 waiver requests to expand their Medicaid program under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The requests were denied on the premise that work requirements would not further program goals of promoting coverage and access. The March 14 letter signals a fundamental change in policy for CMS.

Policy

KFF opined that the reversion to work requirements in Medicaid turns the program into a cash welfare program instead of a program focused on health care coverage. Proponents of the work requirement argue that the expansion of the Medicaid program to able-bodied adults provides a disincentive for those adults to work. Some states have advocated the inclusion of work requirements to ensure that beneficiaries have “skin in the game.” Opponents of the work requirement note that good health is a precondition of work and often an inability to access care can serve, itself, as a barrier to obtaining work.

Statistics

The vast majority (80 percent) of Medicaid adults live in working families. Additionally, more than half (59 percent) of Medicaid adults are working themselves. Thus, KFF estimated that work requirements would have a narrow reach, impacting primarily those who are already at a disadvantage and not working due to disability or caregiver responsibilities.

Will the AHCA affect Medicaid’s nonelderly adults with disabilities?

The changes to Medicaid under the American Health Care Act (AHCA), as approved by the House Energy and Commerce Committee, carries potential implications for the nearly seven million nonelderly adults with disabilities currently covered under Medicaid, according to a Kaiser Family Foundation (KFF) issue brief. KFF’s issue brief describes how the AHCA would change Medicaid and offers insight on its potential effect upon nonelderly adults with disabilities by examining the type of insurance nonelderly adults with disabilities have, how they qualify for Medicaid, what their characteristics are, what services they receive from Medicaid, and how much Medicaid spends on the disabled.

The AHCA would change Medicaid in three major ways: (1) it would change Medicaid’s financing structure to a per capita cap, resulting in an estimated $880 billion reduction in federal Medicaid spending from 2017 to 2026, according to the Congressional Budget Office (CBO cost estimate of AHCA) (see CBO: Republican plan saves billions as 24M lose coverage, Health Law Daily, March 14, 2017); (2) it would repeal the enhanced federal matching funds for Patient Protection and Affordable Care Act’s (ACA, section 2001) (P.L. 111-148) enrollees as of January 1, 2020, except for those enrolled by December 31, 2019, who do not have a break in eligibility of more than one month; and (3) it would end the enhanced federal matching funds for Community First Choice (CFC) (ACA, section 2401), which provides attendant care services for people with disabilities, as of January 1, 2020 (see ‘American Health Care Act’ earns first stamp of approval, Health Law Daily, March 9, 2017).

Here is a summary of the KFF findings:

  • Type of health insurance. Thirty-six percent of nonelderly adults with disabilities are working for pay compared to 77 percent of those without disabilities. Among those who are working, 64 percent have access to employer-sponsored health insurance, compared to 68 percent of nondisabled workers. Thirty-one percent of nonelderly adults with disabilities have Medicaid, compared to 10 percent of those without disabilities. Only 41 percent have private insurance, compared to 74 percent of those without disabilities.
  • How do they qualify for Medicaid? KFF found that some nonelderly adults with disabilities are eligible for Medicaid through the ACA’s Medicaid expansion and some through a disability-related pathway based on both their low income and functional limitations.
  • Nearly 85 percent of nonelderly adults with disabilities have incomes below 200 percent of the federal poverty level (FPL) ($24,120 per year for an individual in 2017). Fifty-seven percent are white, 23 percent black, 16 percent Hispanic, and 3 percent Asian. About one-third of those enrolled in Medicaid have three or more functional limitations, which is more than two and one-half times the rate for those disabled who are privately insured and more than double the rate of those who are uninsured.
  • What services do they receive from Medicaid? Through Medicaid, nonelderly adults with disabilities have access to regular preventive care as well as medical care for illnesses and chronic conditions. States must provide certain minimum services for adults, such as inpatient and outpatient hospital, physician, lab and x-ray, and nursing home services. States also can choose to provide a broad range of optional services, including prescription drugs, physical therapy, private duty nursing, personal care, rehabilitative services, and case management. Most home and community-based services (HCBS) are also provided at the option of the state.
  • ACA expansion options. Section 2001 of the ACA offered states the option to expand Medicaid to nearly all nonelderly adults with income up to 138 percent of the FPL. As of 2017, 32 states have adopted the expansion. Section 2401 of the ACA created the CFC option to provide attendant care services and supports with a 6 percent enhanced federal matching funds. Eight states elected this option as of 2016. Section 2402 of the ACA also allowed states (17 as of 2015) to offer HCBS through the section 1915(i) option ( Sec. Act §1915(i)), which allows states to serve people with functional limitations that do not yet rise to an institutional level of care. Section 2703 of the ACA also created the Medicaid health homes option, which enables states (22 as of 2016) to provide care coordination services for people with chronic conditions at a 90 percent enhanced federal match for the first two years.
  • How much does Medicaid spend on people with disabilities? As of 2011, people with disabilities accounted for 15 percent of total Medicaid enrollment but 42 percent of program spending. Per enrollee spending for people with disabilities totaled $16,643 in 2011, more than five times higher than for adults without disabilities ($3,247) and nearly seven times higher than for children without disabilities ($2,463). One-half of states spend between $15,000 and $19,999 per enrollee for people with disabilities, and another third of states spend between $20,000 and $34,999 per enrollee for people with disabilities.

KFF believes that the AHCA’s per capita cap and elimination of the enhanced federal financing under the ACA expansion will put the states under budgetary pressures due to a reduction in Medicaid funds. It believes that these budgetary pressures may result in the limitation of Medicaid services for recipients, including the nonelderly disabled. KFF believes that careful consideration of the AHCA implications is warranted.

AHCA’s Patient and Stability Fund would benefit large states, study finds

Large states and states with fewer insurers offering coverage in the individual and small group markets could receive the most money under the American Health Care Act’s (AHCA) Patient and State Stability Fund, according to a study by Avalere. The AHCA, which consists of two bills that came out of the House Ways and Means and Energy and Commerce Committees, is touted as an effort to repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148).

Bill

Section 132 of the Ways and Means bill would add title XXII to the Social Security Act to create the Patient and State Stability Fund. The Fund would provide funding for the states and District of Columbia from 2018 through 2026 for eligible states to do any of the following:

  • provide financial assistance to high-risk individuals who do not have employer health insurance to enroll in health insurance coverage in the state’s individual market;
  • provide incentives for entities to enter into agreements with the state to help stabilize health insurance premiums in the health insurance market;
  • reduce the cost for providing coverage in the individual and small group markets;
  • promote participation in the individual and small group markets and increase available insurance options;
  • promote access to preventive services, dental care, and certain services for individuals with mental or substance abuse disorders;
  • provide payments to providers for the provision of health care services as specified by the Administrator; and
  • provide assistance to reduce out-of-pocket costs for individuals enrolled in health insurance coverage in the state.

Funding

The bill would appropriate $100 billion over 10 years to provide allocations to states. According to Avalere, the first 85 percent of the funds would be distributed based on the share of the state’s insurance claims as a percentage of the nation, so states that have more people with insurance and higher medical costs could receive more funding that states lower overall enrollment and spending.

The remaining 15 percent would be distributed to states that have seen an increase in the number of low-income uninsured from 2013 to 2015 or have fewer than three insurers offering coverage in their exchange in 2017.

Distribution among states

According to Avalere, the allocation methodology could result in states like California, Florida, and New York receiving the most money North Carolina, Arizona, Alabama, Oklahoma, and South Carolina could receive disproportionately high amounts of money due to the lack of health insurance participation on their markets in 2017.

The funding levels “vary widely” on a per capita basis compared to the state’s individual market enrollment in 2015, Avalere concluded. They range from $1,830 in the District of Columbia to $220 in Montana.

Did CMS just sound the death knell for Medicaid expansion?

In their first joint action, HHS Secretary Price and newly confirmed CMS Administrator Verma issued a letter to state governors discussing potential improvements to the Medicaid program. The letter underscored the need to develop cost-effective, state-specific ways to serve vulnerable populations but made clear the administration’s anti-expansion stance, noting that the Patient Protection and Affordable Care Act’s (ACA’s) (P.L. 111-148) expansion of Medicaid “to non-disabled, working-age adults without dependent children was a clear departure from the core, historical mission of the program.”

Overall, Price and Verma emphasized their desire to grant states more freedom to design their own programs, but committed to retaining mechanisms to ensure state accountability, including budget neutrality in waivers and demonstration projects. To this end, the letter suggested fast-tracking waiver and demonstration project extensions and developing consistent guidelines for evaluating requests to waivers and demonstration projects that have already been approved in other states. Price and Verma plan to use “Section 1115 demonstration authority to review and approve meritorious innovations that build on the human dignity that comes with training, employment and independence.” Prior to serving as CMS Administrator, Verma was involved in crafting Indiana’s Healthy Indiana 2.0 expansion program. The program initially sought to impose a work activity requirement. CMS declined to approve the requirement linked directly to Medicaid eligibility, but allowed the state to encourage enrollees to participate in other voluntary state programs (see Amendment of Healthy Indiana Plan implements Medicaid expansion, Health Law Daily, February 11, 2015).

Price and Verma also noted the importance of maintaining public input processes and transparency guidelines, with respect to State Plan Amendments (SPAs) and other actions, expressed a desire to make the SPA process less burdensome. They discussed allowing states more time to comply with a 2014 Final rule regulating expanded access to home- and community-based services (see Final rule sets requirements for expanded home and community based services, Health Law Daily, January 16, 2014). They made suggestions for aligning Medicaid policies for non-disabled adults with commercial health insurance features to help them “prepare for private coverage,” including alternative benefit designs with aspects similar to health savings accounts (HSAs), designing emergency room copayments to encourage the use of primary and other providers for non-emergency care, and facilitating enrollment in employer-sponsored health plans. They also plan to work with states to combat the opioid epidemic, through state plans, the Medicaid Innovator Accelerator Program, and other methods.