CMS maintains Medicaid work requirements can withstand legal challenges

(Updated at 12:15 p.m. ET)

The CMS is confident that its decision to approve states' Medicaid work requirement waivers can withstand any litigation challenging the policy shift.

On Thursday morning, the CMS issued new guidance intended to help states reshape their Medicaid programs. The agency spelled out criteria for states to follow when applying for waivers to add such things as work requirements for beneficiaries.

Opponents of the work requirement policy say it's a contradiction of the purpose of Medicaid, which was established by Congress in 1965 to provide coverage to low-income people.

Hours after the guidance's release, Families USA announced it was working closely with the National Health Law Program and others to support legal challenges against the new policy if the CMS actually approves these waivers.

However, during a call with reporters Thursday, CMS Administrator Seema Verma said she believes that the law is on the agency's side.

"The 1115 [statute] gives broad authority to the secretary to approve state experiments and programs that promote the objectives of the Medicaid program," Verma said. She added there are studies that show the benefits employment has on a person's health.

The CMS can only offer waivers in states that want to experiment with Medicaid policy, but continue to ensure coverage for low-income people, said Eliot Fishman, who oversaw 1115 waiver demonstrations for the Obama administration and is now senior director of health policy at Families USA.

It's unclear how many people will have to comply with Medicaid work requirements. Verma declined to give an estimate, saying it comes down which states ask for waivers and how they are implemented.

Last year, a study in Health Affairs estimated that as many as 11 million people could lose coverage if every state imposed Medicaid work requirements. Even though people with disabilities would be exempt from the requirement, many beneficiaries may have physical or mental limitations that prevent them from working, but don't qualify them as disabled.

Several states—Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, New Hampshire, North Carolina, Utah and Wisconsin—have already applied for Section 1115 waivers. It is unclear if any will have to amend their requests to adhere to the guardrails outlined in the new guidance.

Critics have also argued that work requirements are merely a way to cull the Medicaid rolls and cut spending.

But Verma dismissed the notion that people exiting Medicaid would mean the work requirements had a negative effect.

"People moving off of Medicaid is a good outcome because we hope that means they don't need Medicaid anymore," Verma said.

The new requirement is not only expected to impact able-bodied adults who gained Medicaid coverage via expansion, but low-income adults in non-expansion states, Verma said.

This population is largely made of parents or caregivers of children and former foster children. Some states cover children until they turn 21.

The guidance leaves it up to states whether or not to exempt these populations from the requirements.

The Kansas chapter of the American Academy of Pediatrics slammed its state's pending work proposal, noting that between 35% to 60% of foster children have at least one chronic condition requiring care and those needs continue after they turn 18. The state covers children until they are 19.

"Putting up barriers for needed care for this population would result in both medical and financial hardships for those with the most need at a time when they are just starting out on their own," the academy said in a comment letter.

After the guidance's release, The American College of Physicians also said it is strongly opposed to making access to healthcare coverage through Medicaid conditional on an individual's employment status.

"Work requirements impose an additional, unnecessary barrier to allowing patients access to vital healthcare services for people who need access and coverage the most," Dr. Jack Ende, president of the American College of Physicians said in a statement.

The CMS identified several issues for states to address when fleshing out their waivers. For instance, the agency stipulated that work requirement criteria take into account unemployment rates and care giving for children or the elderly. States will also have to detail how they are helping potential beneficiaries meet work and community engagement requirements.