States face big costs, coverage losses from Medicaid work requirements

Implementing Medicaid work requirements will be administratively cumbersome and costly, cause many people to lose coverage and drive up uncompensated care, according to a think tank report issued Wednesday.

The liberal Center on Budget and Policy Priorities said implementing so-called community engagement requirements, premiums and other new conditions will cost states and the federal government tens of millions of dollars for eligibility system changes and increased staff to track compliance and handle appeals.

Medicaid agency staff in many states already are overwhelmed meeting current administrative requirements, the report's authors said, and beneficiaries often have trouble getting their enrollment applications and other paperwork processed in a timely way.

The group concluded that states and the federal government ultimately may save money on the Medicaid waiver programs but that those savings will come entirely from people losing coverage and access to care.

"Effectively, these proposals divert some state and federal resources from paying for healthcare to paying for new bureaucracy," the report said, citing spending that will go for hiring IT vendors, other contractors and new state staff.

The CMS approved Medicaid waivers requiring work or other community engagement activities in Arkansas, Indiana, Kentucky and New Hampshire, following the agency's release of a guidance letter in January permitting such requirements. Alaska, Arizona, Maine, Minnesota, Mississippi, Michigan, Ohio, Utah, Virginia and Wisconsin are considering or seeking similar waivers. Work requirements have never previously been allowed in Medicaid.

The Center on Budget and Policy Priorities report noted that Kentucky plans to spend nearly $190 million over the next two years to implement its waiver, while Minnesota estimates that its counties would spend $121 million in 2020 and $163 million in 2021 to administer work requirements. Some observers predict states will end up spending substantially more than they estimated.

Minnesota counties projected it would take an average of 53 minutes to process each exemption from the requirement, 22 minutes to refer a client to employment and training, and 84 minutes to verify non-compliance and suspend Medicaid benefits.

In contrast, Arkansas said it would incur a $679,000 one-time cost to the state and $6.1 million to the federal government to make necessary system changes to administer the community-engagement program. In addition, it said it would cost $400,000 to do outreach and education for that requirement in 2018. It projected it wouldn't need additional state staff.

"The goal is to help people keep their coverage and improve their circumstances, move up the economic ladder, and get an education," said Marci Manley, a spokeswoman for the Arkansas Department of Human Services. "We're directing people to programs that already exist."

Starting in July, the Kentucky waiver will require non-disabled beneficiaries to complete 80 hours per month of community engagement activities, such as employment, education, job skills training or community service, to maintain their Medicaid eligibility. That applies to both the traditional Medicaid population and the expansion population.

The state projects that 95,000 fewer Kentuckians will have Medicaid coverage in five years due to the new requirements.

The Arkansas waiver program, which starts June 1, has similar work or community engagement requirements but only applies to the 280,000 Medicaid expansion enrollees.

Each of the approved state community-engagement waiver programs establish different categories of people who will be exempt from the requirements, such as people who are disabled or medically frail, those in substance-abuse treatment programs, and caregivers for ailing family members.

Some of these categories are vaguely defined, such as Arkansas' "good-cause" exemption.

The report warned that these exemptions will be difficult for states to administer and for beneficiaries to understand and qualify for. For instance, people who fall into categories such as homelessness, serious mental illness, and victims of natural disasters may not be capable of applying for these exemptions.

"These policies are so complex and hard to administer and navigate that a lot of eligible people will fall through the cracks," said Jennifer Wagner, senior policy analyst at the center. "They'll have to prove their compliance, and a lot is left to the discretion of state workers."

The center noted that past state experience with increased documentation and other requirements for Medicaid enrollment, such as in Washington, have led to large coverage losses. Requiring premium payments, as Kentucky's waiver model does, also have led to sharp coverage declines.

Several advocacy groups have sued to block Kentucky's waiver program and overturn the CMS guidance allowing Kentucky and other states to impose these new requirements as conditions for receiving Medicaid benefits. Oral arguments in the proposed class-action lawsuit in the U.S. District Court for the District of Columbia are scheduled for June 15.