Medicaid Work Requirements Would Strain Hospital and State Budgets

Louisiana state officials warned earlier this year that thousands of elderly and disabled people would be evicted from nursing homes if lawmakers failed to reverse course on Medicaid cuts and solve the state’s ongoing budget crisis. (Lawmakers later moved to shield the elderly and disabled from spending cuts but have yet to pass a budget.) In Kentucky, Republican Gov. Matt Bevin proposed raiding $201 million from a health care fund for state workers to balance the state’s budget, a move that critics said would rob cost savings from Bevin’s employees.

For conservatives opposed to tax hikes, balancing budgets needed to keep schools open and hospitals running in cash-strapped states is not easy. By placing work requirements on adults in state Medicaid programs that provide health coverage for low-income people, Republicans in 11 states could make that job even harder.

By expanding coverage for millions of people, the Affordable Care Act’s Medicaid expansion reduced un-recouped costs at hospitals and in emergency rooms and funneled billions of dollars in new federal funding into state coffers. Kentucky alone was expected to realize a net fiscal benefit of $919 million from 2014 to 2021 as a result of Medicaid expansion, including nearly $100 million in savings, according to one state analysis commissioned before Bevin was elected.

Bevin and other Republicans have a different idea for saving money: Reduce the number of people covered by Medicaid. Unable to repeal the Affordable Care Act in Congress, the Trump administration and its allies in state government are chipping away at Medicaid expansion by applying for federal waivers to place work requirements and other conditions on enrollment. Kentucky expects its work requirements to reduce Medicaid rolls by 15 percent, which means about 100,000 people would lose coverage in an average month, according to an analysis from the Center on Budget Policy and Priorities (CBPP).

Trimming Medicaid rolls may bolster a conservative ideologue’s profile on the national stage, but back home it could be very costly for hospitals and state health programs, not to mention lower-income families. To institute work requirements, states like Kentucky plan to shift millions of dollars in health care spending into a bureaucracy for tracking and verifying the employment status of enrollees. Enrollees will need to document and prove to the state that they are working, volunteering or training to work a certain number of hours, and critics say people in real need of assistance could lose their coverage in the red tape.

Some people with disabilities are bound to lose Medicaid coverage as they attempt to navigate the exemptions system.

Some states are crafting exemptions to the work requirements for people who were recently hospitalized or impacted by a natural disaster, for example, but people would need to know that they can take advantage of the exemptions first, according to Jennifer Wagner, a senior policy analyst at the CBPP. They then must gather documentation and present it to whatever bureaucracy has been created to manage eligibility in order to access health care, all while dealing with whatever crisis made them eligible for the exemption in the first place.

“So, we expect that a lot of those folks will fall through the cracks,” Wagner said during a call with reporters this week.

Enrollees working part-time or in the gig economy could lose coverage because their hours may vary from month to month, a common experience among low-income workers, according to the CPBB. As Truthout has reported, advocates say some people with disabilities are bound to lose Medicaid coverage as they attempt to navigate the exemptions system because they initially qualified for a different reason.

“Even when waivers try to account for all of these complexities, it actually will not translate on the ground for people who need to be covered,” Wagner said.

With fewer Medicaid participants comes less spending at hospitals and clinics for routine check-ups, so lower-income patients would tend to be sicker when they do seek care. Simply put, more people would be unable to pay for emergency room visits and other services that certain hospitals are required to provide. Analysts call this “uncompensated care” because providers are unable to recoup costs from Medicaid and a patient who cannot afford them.

Obamacare reduced uncompensated care costs in every state that signed up for the Medicaid expansion. In states like California and Kentucky, uncompensated care costs for hospitals dropped by 64 percent and 65 percent in the years following expansion, respectively. This allowed hospitals to expand their services, particularly in underserved rural areas. Demand for state-funded health programs — including payments for uncompensated care to hospitals — also dropped in Medicaid expansion states, taking pressure off of state budgets, according to the CBPP.

Less health care spending also takes an economic toll. The federal government shares Medicaid costs with states, and in Kentucky, work requirements are expected to reduce the flow of federal funds to the state by $700 million annually, according to The Commonwealth Fund, a health care advocacy group. That money would have helped hospitals expand services and pay doctors, nurses and staff, who in turn would pump it back into the state economy. The economic benefit of eventually cutting Medicaid spending and encouraging employment is expected to be modest in comparison.

Implementing work requirements would also create new costs as states staff and create a bureaucracy for enforcing the rules and verifying the employment status of enrollees. States are expected to pay tech contractors tens of millions of dollars to change notices and forms, reprogram eligibility systems, address questions from applicants, handle appeals and track premium payments in states where enrollees are expected to pay.

“Effectively, these proposals divert some state and federal resources from paying for health care to paying for new bureaucracy,” said CBPP Senior Fellow Judy Solomon.

The Trump administration has already signed off on Kentucky’s waiver allowing the state to place work requirements on able-bodied Medicaid enrollees, and the state plans to spend $373 million on implementation over the next two years. Alaska estimates its proposed work requirements would cost an additional $78.8 million over the next six years. The federal government is expected to shoulder some of these costs, leading Democrats in Congress to call for an investigation into just how much work requirements would constrain federal and state budgets.

For this reason, states are expected to spend more money before realizing any savings from kicking people off Medicaid. This may explain why Louisiana Gov. John Bel Edwards, a Democrat who ran on expanding Medicaid in a conservative state, recently walked back on statements suggesting he was considering work requirements for his state. Even Republicans in Louisiana are wary of reducing Medicaid rolls as they grapple with a fiscal crisis, and watered-down work requirement legislation died in the GOP-controlled legislature this year.

Any savings that other states do eventually realize from instituting work requirements would be the direct result of vulnerable people losing their health care coverage, putting further strain on families, health care systems and state budgets. Proponents say requiring labor participation would reduce reliance on the government in the long run and eventually decrease the burden on taxpayers, but critics say this idea is more rooted in conservative ideology than the facts on the ground. It’s a highly politicized gamble, and more Americans are expected to be less healthy as a result.