Broken, frayed net, representing a broken social safety net

Are Work Requirements Sinking as Arizona and Indiana Abandon Ship?

By Nicolas Terry

There’s an old saying, credited to Will Rogers, “If you find yourself in a hole, stop digging!” When it comes to Medicaid work requirements there has been mounting evidence that excavation cessation would be good advice for states considering this misguided attempt at social engineering. After all, work requirement waivers face unrelenting legal challenges, an obdurate CMS apparently unable to fashion a lawful waiver, mountains of bad data, and increasingly poor optics. Two weeks ago Arizona, which had yet to implement its program, jumped ship notifying CMS that it was postponing implementation. This week Indiana, which began implementation at the beginning of the year, announced a similar postponement.

According to the KFF Medicaid Waiver Tracker, CMS has approved applications from nine states for Section 1115 work requirement (or “community engagement”) waivers. Nine more are pending. Of the nine states with approvals, three (Arkansas, Kentucky, and New Hampshire) have had them overturned by D.C. Circuit Judge Boasberg. Work requirement poster state Kentucky even had a second, revised waiver overturned. Of the six other approved states, five (Arizona, Michigan, Ohio, Utah, and Wisconsin) have yet to implement their work requirements. Until this week, the sixth, Indiana, had been performing a slow and litigation-free roll out. However, with its work requirement sanctions about to get serious, a few weeks ago Indiana also found itself on Judge Boasberg’s docket.

In the four decided cases, plaintiffs argued that the work requirement waivers fundamentally altered the design and purpose of Medicaid, while the Secretary neither offered his own estimates of the number of Medicaid-covered persons who would lose coverage nor dealt with the estimates in the record. The Secretary’s silence on the issue is not surprising. Back in 2017, CMS Administrator Seema Verma and then-HHS Secretary Tom Price wrote to the country’s governors announcing the acceptability of work requirement waivers, making clear they were seeking to reframe Medicaid as welfare rather than health insurance. However, as Judge Boasberg said in the New Hampshire case, “the Secretary needed to consider whether the demonstration project would be likely to cause recipients to lose coverage and whether it could cause others to gain coverage.” Even a cursory listen to the oral arguments before the D.C. Circuit is enough to inform a guess that Judge Boasberg’s judgments will be upheld and that any possible resolution in the Administration’s favor will have to await the Supreme Court.

Data analysis of the impact of work requirements has not been helpful to CMS, making the Secretary’s failure to engage on the numbers even more damning. First, analysis of Indiana’s HIP 2.0 (prior to work requirements, but involving skin-in-the-game features), cast doubt on behavioral economics nudges leading to successful social engineering; almost 60 percent of non-expansion persons never enrolled or were dis-enrolled for failing to pay premiums, while 51 percent of expansion persons never enrolled or lost coverage. Research pointed to enrollment affordability and enrollee confusion about the payment process as the primary reasons for non-enrollment or loss of enrollment. Second, before it was shut down by Judge Boasberg, the “Arkansas Works” program had been up and running for about nine months and generated similar disturbing data. In the first six months, approximately 12 percent of those with Arkansas Medicaid lost coverage without moving any employment or community engagement needles. As with the study of Indiana’s HIP 2.0 program, enrollees were confused about the changes and faced difficulty reporting and other administrative barriers. A later study found that over 18,000 persons lost their health insurance for failing to meet the Arkansas requirements. Another study estimated that between 589,000 and 811,000 people would lose Medicaid coverage after 12 months if work requirements were implemented in all states that have received waivers.

The bad data confirmed that work requirements are a bad idea. Tying Medicaid eligibility to employment is based on several false premises. The first is that adults on Medicaid are not working, when in fact most are employed. The second is that rather than work improving health and well-being, health makes it more likely that persons will seek work. Third, many Medicaid-covered persons live in areas with high unemployment and few jobs or lack the education or credentialing to qualify for employment. Fourth, many Medicaid-covered persons have serious medical conditions or disabilities that create serious barriers to employment.

Unsurprisingly, the Arizona and Indiana postponement statements failed to acknowledge these fundamental flaws. The Arizona announcement merely referenced an “evolving national landscape” and “ongoing litigation.” The Indiana announcement was similar, although it reiterated the state’s commitment to its “Gateway to Work” program and promised its resumption (with “substantial advance notice”) after the litigation was resolved.

The Indiana suspension was particularly interesting because the state had tried to learn from the prior litigation and the bad optics of thousands of persons losing their health insurance. First, it tried to thread the needle between a work requirement and job training, connecting “HIP members with ways to look for work, train for jobs, finish school and volunteer.” Second, it implemented the program with a kindler, gentler roll-out that required no reported hours of work or engagement for the first six months (or bad headlines), slowly building to eighty hours per month after July 2020. Indiana’s Medicaid Director reportedly went so far as to vow that no current beneficiaries would lose benefits. Yet, the program web site states “Gateway to Work was designed with a requirement for some members to do Gateway to Work activities to keep their HIP benefits.”

Notwithstanding the assumption that final approval of work requirements will have to await a 2020 Supreme Court appeal from the assumed D.C. Circuit decision (though cert. den. may be a better bet), the Administration continues to defend its position in public. In an October 2019 speech Administrator Verma noted “it is so important that we support state innovation designed to help lift people from poverty rather than trap them there” — code for work requirements. However, in all likelihood, the Administration has already moved on as it launches its newest plan to dismember Medicaid, suggesting states use the waiver process to request a block grant model of financing, as previewed by Tennessee’s recent request.

As to the future of work “requirements,” states perhaps should look to Pennsylvania. There, those who are Medicaid eligible can request job training which is facilitated by the state’s Medicaid MCOs. In the words of the Keystone state’s human services secretary, “I worry that, with its reporting rules, work requirements result in fewer people covered by Medicaid, and that is not our goal… Our goal is to try to get people out of poverty. If you take access to health care away for people not working, I’m not sure how that helps people get a job.” That seems to be an approach to work “requirements” we could all get behind.

Addendum, Nov. 12, 2019

Montana, which has applied for but not yet been granted a work requirement waiver, has announced a delay in implementation because of the need to write administrative rules and build the necessary software. Meanwhile, the results in some recent state elections are likely to change the work requirements map; in Kentucky, Democrat Governor-elect Beshear, ran on a promise to rescind work requirements, while the Democratic party’s takeover of both houses may lead Governor Northam to cancel that state’s waiver application.

Nicolas P. Terry

Nicolas P. Terry

Nicolas Terry is the Hall Render Professor of Law at Indiana University McKinney School of Law where he serves as the Executive Director of the Hall Center for Law and Health and teaches various healthcare and health policy courses. His recent scholarship has dealt with health privacy, mobile health, the Internet of Things, Big Data, AI, and the opioid overdose epidemic. He serves on IU’s Grand Challenges Scientific Leadership Team, working on the addictions crisis and is the PI on addictions law and policy Grand Challenge grants. His podcast is at TWIHL.com, and he is @nicolasterry on Twitter.

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