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Policy Tip Sheet: Work Requirements Are Crucial to Stabilizing State Medicaid Programs

June 24, 2019

In this Policy Tip Sheet, Matthew Glans discusses how work requirements are desperately needed to ensure the long-term viability of Medicaid and keep costs under control.

Problem

Millions of Medicaid recipients can work but choose not to. More than 60 percent of Medicaid recipients are able-bodied, working-age adults, yet half of them do not work, according to a 2018 study by the White House Council of Economic Advisors. Indeed, the Foundation for Government Accountability (FGA) found an “estimated 6.8 million of the 12.4 million expansion enrollees nationwide are not working at all.”

In recent years, Medicaid rolls expanded at an unsustainable pace. The number of able-bodied adults enrolled in Medicaid rose rapidly over the past two decades. According to FGA, around 28 million able-bodied adults are now dependent on the program, up from fewer than seven million in 2000. The cost of these new recipients has grown to more than $500 billion per year.
 

Policy Solution

Instead of expanding Medicaid, states should impose reforms to increase access to high-quality, affordable health coverage. One way to accomplish this goal is for states to use Section 1115 waivers. Under provisions written into the original Medicaid law, state policymakers can apply for Section 1115 waivers from the U.S. Department of Health and Human Services (HHS), which, if approved, would allow states more flexibility to innovate and make significant changes to their Medicaid programs.

Work requirements for able-bodied adults without dependents are vital for states to ensure the long-term viability of Medicaid. Work requirements also help people move from government dependence to self-reliance. A well-paying job is the best way for people to lead happy, healthy, and productive lives.

A model for how to implement work requirements already exists within the Supplemental Nutrition Assistance Program (SNAP). In SNAP, low-income, able-bodied adults without dependents are limited to receiving food stamps for three months in a three-year period unless they fulfill work requirements, which typically entail employment or participation in a training program for at least 20 hours per week.

States that have enacted work requirements have enjoyed significant success in reducing their Medicaid rolls and budgets. For example, after Maine imposed work requirements in 2014, its Medicaid rolls for able-bodied adults without dependents decreased by about 80 percent during the first year of the reforms.

The Heritage Foundation estimates the reforms could save taxpayers nationwide “around $90 billion over the next 10 years, or roughly 13 percent of the program’s 2018-27 projected spending.”

In a 2017 study by the Foundation for Government Accountability, Nic Horton and Jonathan Ingram examined Kansas’ welfare reforms and found they drove individuals to reenter the labor force. They also determined the incomes of Kansas families exiting the Temporary Assistance for Needy Families program increased substantially, more than doubling in the first year. According to the study, as of 2017, families who left TANF are now earning $48 million more per year than they had while receiving cash assistance. In fact, the new incomes of those leaving the welfare system increased 104 percent in one year. Four years after the reforms, these same individuals’ incomes had increased by a staggering 247 percent.
 

Policy Message

Point 1: Work requirements are desperately needed to ensure the long-term viability of Medicaid and keep costs under control.

Point 2: More than 60 percent of Medicaid beneficiaries are able-bodied, working-age adults and half of this group does not work.

Point 3: States that have enacted work requirements have enjoyed significant success lowering caseloads and moving recipients into the workforce.

Point 4: Most individuals who leave Medicaid subsequently enroll in a private, employer-sponsored insurance plan, which offer better benefits and decrease the burden on taxpayers.

Point 5: Work requirements help keep Medicaid costs down and encourage self-reliance while providing opportunities for low-income people who need temporary aid while they build their resumes, look for jobs, or receive job training or education.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR