The Biden administration on Friday started to unwind a controversial Trump-era policy that allows states to force low-income residents to work, volunteer or take part in other so-called "community engagement" activities to enroll in Medicaid coverage.
The news comes just two weeks after President Joe Biden ordered federal health officials to reexamine policies that make it more difficult for individuals to access or afford coverage, including Medicaid work requirements. CMS withdrew a 2018 letter from former CMS Administrator Seema Verma to state Medicaid officials that invited them to apply for the waivers. The agency also reversed its approval for Georgia's partial Medicaid expansion, which is now "pending." CMS will also send a letter to 10 states with waivers for Medicaid work rules, informing them that the agency will repeal their waivers soon, Politico first reported. It in its letter to Arkansas, the agency said it had "preliminarily determined that allowing work and other community engagement requirements to take effect in Arkansas would not promote the objectives of the Medicaid program."
"In the midst of the greatest public health emergency in generations, now more than ever, people with Medicaid need access to care. Medicaid's primary objective, as set out by Congress, is to provide medical assistance in order to serve the health and wellness needs of our nation's vulnerable and low-income individuals and families, based on need, not based on one's ability to find work. This is not the time to experiment or test policies that risk a substantial loss of health coverage or benefits, especially for individuals and communities significantly impacted by COVID-19 and other health inequities," a CMS spokesperson said in an email.
Dan Mendelson, a former Clinton administration official and founder of consulting firm Avalere Health, said undoing the waivers is consistent with the Biden administration's stated goal to increase the number of people with health insurance because the Trump-era "policy directly contradicts what they are trying to accomplish." But it could take time to undo the waivers. Just before former President Donald Trump left office, Verma asked states to sign contracts that would make it more challenging for CMS to end states' work requirements. Experts have questioned whether those contracts are legally enforceable.
The Biden team will need to review the contracts to see how much flexibility they allow. Mendelson said that Medicaid is an ongoing negotiation between the federal government and states because it is jointly funded and administered.
"Now that states understand the policy … there will be accommodations (to) make sure that these programs are operating smoothly and that (states) don't have to make radical changes quickly that would jeopardize the operation of their Medicaid programs," Mendelson said.
But a former senior Trump administration official told Modern Healthcare that it was "heavy-handed" for Biden's team to revoke waivers approved by the previous administration and that states might sue the federal government because CMS didn't "follow the process they set up."
Most experts agree that there shouldn't be much disruption since work requirements aren't in effect in any state. In addition, states stopped disenrolling Medicaid beneficiaries to get a 6.2% increase in their federal share of Medicaid spending during the public health emergency.
Democrats, consumer advocates and many healthcare experts oppose work requirements for Medicaid coverage, arguing that they lead to sizable coverage losses and don't increase employment. Of the 13 states CMS approved for a work requirement, Arkansas was the only state to implement its experiment completely. But a federal court struck down the demonstration after seven months because the work rules were inconsistent with the Medicaid law. A federal appeals court agreed. The Supreme Court is set to hear a final appeal on March 29, but the Biden administration's latest moves could make the case moot.
The D.C. Circuit opinion, written by Republican-appointed Judge David Sentelle, said it "is indisputably correct that the principal objective of Medicaid is providing healthcare coverage," not to encourage work.
A Health Affairs study about Arkansas' demonstration found that more than 18,000 people, or nearly 1 in 4 people covered by the waiver, lost their coverage and suffered profound adverse effects on their finances and medication adherence. The same study found that the requirements didn't increase employment.
Conservative policymakers still insist that requiring people to work to receive Medicaid coverage encourages more people to seek employment, which arguably could improve their long-term well-being and ensure that people don't receive benefits if they don't qualify for them.
Most experts agree that having health coverage keeps people healthier, which allows them to work more hours, not the other way around.
The former Trump official argued that policymakers shouldn't draw any conclusions from Arkansas' experience because the state's experiment never had an opportunity to overcome its early implementation challenges before the courts put the policy on hold.
"I think it's ridiculous to use Arkansas as an example," they said. "It's like evaluating Obamacare based on the HealthCare.gov experience … HealthCare.gov was a disaster when it rolled out."
Arkansas didn't have adequate reporting systems in place when the requirement took effect, and CMS had been working with the state to make it easier for its Medicaid enrollees to report, the official said. But experts have said those problems were foreseeable and should have been addressed before the agency approved Arkansas' waiver.
More conservative states may have taken advantage of Medicaid expansion because of the work requirements, according to the former Trump official. Still, 12 states never expanded Medicaid, despite generous financial support from the federal government.
Former Kentucky governor Matt Bevin threatened to end the state's Medicaid expansion altogether if the state didn't adopt a work requirement. He ultimately got permission from the Trump administration to add work requirements, premiums and copayments to the state's Medicaid program.
The waivers "kept a lot of Republican governors in the game," the former official said.
But that argument didn't sit well with Mendelson, who said the Trump administration "made a blunt statement" when it removed coverage expansion from the waiver program's objectives—a Health Affairs study found about 2.3 million people lost coverage from 2016 to 2019.
There are better ways for states to encourage work among people who are otherwise eligible for Medicaid, like Montana's work referral program, said Patricia Boozang, a consultant for Manatt Health that advises states on Medicaid expansion design, implementation and sustainability. According to the Center on Budget and Policy Priorities, the program targets Medicaid enrollees who are not working but are looking for work or better jobs. It links them with services such as career counseling, on-the-job training programs and subsidized employment. The results of the program have been encouraging.
"I think there's a genuine policy interest in helping people connect to meaningful work, but there are many tools at the disposal of conservative legislators," Boozang said.
Even so, experts agree that non-expansion states are holding out because of political ideology, not financing concerns.
House Democrats plan to entice holdout states to expand their Medicaid programs by further increasing their federal share of Medicaid funding for two years. The boost could help states avoid provider rate cuts. Some experts think the ploy could encourage states to expand quickly. Mendelson thinks the plan could come into play during the 2022 midterm elections, especially for Democrats running against Republicans in non-expansion states.
"That becomes a very powerful tool for them (to say), 'You are leaving billions of dollars on the table by not helping our most vulnerable citizens,'" he said. "In polling, these Medicaid expansions are very popular. I think this is a longer-term game."
Boozang said many providers, especially safety-net providers, could breathe a sigh of relief knowing that Medicaid work requirements are on their way out since the policy creates "more uninsured people and more churn."