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Research & Commentary: Work Requirements Help Preserve Medicaid Assistance for the Truly Needy

April 26, 2019

In this Research & Commentary, Matthew Glans examines a proposal in North Carolina that would create work requirements for the state’s Medicaid program.

As in many states, North Carolina’s Medicaid program costs are increasing at an unsustainable rate. In 2015, North Carolina spent 31.5 percent of its budget on Medicaid, a 7.3 percent point increase from 2010. In fiscal year 2017, federal and state spending for North Carolina’s Medicaid program totaled approximately $13.5 billion, according to the Kaiser Family Foundation.

In late March, a new bill, House Bill 387, was introduced in the North Carolina General Assembly that would create new work and community engagement requirements as a prerequisite to participate North Carolina’s Medicaid program for non-elderly, non-pregnant, adult Medicaid beneficiaries who are eligible for Medicaid on a basis other than disability. The bill calls on the Department of Health and Human Services to develop these new rules based on the regulations used by the Supplemental Nutrition Assistance (SNAP) program.

The bill would add a 20 hour per week work requirement for Medicaid enrollees between the ages of 19 and 64, similar to the federal rules for SNAP recipients. The bill includes an exemption for individuals  who  are  the  parent  or  caretaker  of  a  dependent  child  under  one year of age, individuals who have been certified as unfit for employment for physical or mental health reasons, individuals actively participating in a substance abuse treatment and rehabilitation program, who are the parent or caretaker of a dependent child under one year of age, and individuals who are a parent or caretaker who provides care for a dependent child with a serious medical condition or disability, amongst other exemptions.

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-sufficiency. A well-paying job is the best way for people to lead happy, healthy, and productive lives. H.B. 387 would direct the Department of Health and Human Services to submit to the Centers for Medicare and Medicaid Services an 1115 waiver requesting the necessary approval to implement these requirements.

The Section 1115 waiver process gives states the flexibility they need to reduce health care costs and increase quality. Work requirements are just the first step towards full Medicaid reform. North Carolina should use Section 1115 waivers to institute free-market reforms that will increase access to high-quality, affordable health care without growing state budgets or the national debt.

Opponents of work requirements claim they force people off Medicaid without reliable access to health care. However, the majority of individuals who leave Medicaid subsequently enroll in a private, employer-sponsored insurance plan, which offers better benefits. In fact, medical care benefits were available to “69 percent of private industry workers and 89 percent of state and local government workers in March 2018,” according to the U.S. Bureau of Labor Statistics.

Work requirements are desperately needed because Medicaid rolls are expanding faster than the program can handle. The number of able-bodied adults enrolled in Medicaid rose rapidly from 2013 to 2015, from fewer than 133,000 to more than 633,000. Further, government spending for this population rose by six times, from $667 million in 2013 to $4 billion in 2015.

An unacceptably large portion of Medicaid recipients can work but are choosing not to. More than 60 percent of Medicaid beneficiaries are able-bodied, working-age adults and half of this group does not work, according to a 2018 study by the White House Council of Economic Advisors. Another report from the Foundation for Government Accountability found an “estimated 6.8 million of the 12.4 million expansion enrollees nationwide are not working at all.”

Medicaid should focus on encouraging able-bodied recipients who are enrolled in these programs to become more self-sufficient and less dependent on government aid. The real focus of these programs must be to provide temporary or supplemental assistance while encouraging work and independence. 1115 waiver reforms can include a waiver allowing states to implement payment enforcement mechanisms to encourage enrollees to pay for additional cost-sharing, such as co-pays; reforms to allow states to deploy incentives for enrollees to engage in healthy behaviors; the creation of time limits on coverage; or the creation of monthly income verification and eligibility renewals.

The following documents examine Medicaid reform and expansion in greater detail.
 

The Arizona Medicaid Expansion Experience: Beware the Peddlers of Cost-Shifting Claims
https://goldwaterinstitute.org/wp-content/uploads/2018/08/ArizonaMedicaidExperience_FINAL.pdf
This study, written by Naomi Lopez Bauman, Angela Erickson and Christina Sandefur examines the effects of Medicaid expansion on health care costs and whether it has cut down on the high cost-sharing borne by the insured. The study concludes expansion increased the burden on the privately insured. “The Arizona experience is a cautionary tale for lawmakers: A program should be evaluated based on outcomes, not intentions. Arizona’s expansion not only failed to deliver on its promise to alleviate supposed cost burdens on private payers, it exacerbated them.

The Report Every State Legislator Should Read
http://www.nationalreview.com/article/440411/obamacare-medicaid-expansion-hospitals?target=author&tid=954473
In this article published by National Review, Chris Jacobs writes about a new report issued by the Congressional Budget Office that analyzes profit margins for hospitals over the coming decade. It concludes Medicaid expansion will not make a material difference in hospitals’ overall viability.

Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems
https://www.heartland.org/publications-resources/publications/evidence-is-mounting-the-affordable-care-act-has-worsened-medicaids-structural-problems
In this Mercatus Center paper, Brian Blase examines the effect of the Affordable Care Act on Medicaid. Blase’s findings reveal Medicaid expansion has worsened many of the structural problems in the program. “The unanticipated expense casts doubt on the value of the ACA Medicaid expansion. The enhanced federal match incentivizes states to boost ACA expansion enrollment and to categorize Medicaid enrollees as ACA expansion enrollees, and also encourages states to set high fees for ser­vices commonly used by expansion enrollees and high payment rates for insurers participating in states’ Medicaid managed care programs,” wrote Blase.

Research & Commentary: States Pursue Work Requirements for Medicaid
https://www.heartland.org/publications-resources/publications/research--commentary-states-pursue-work-requirements-for-medicaid?source=policybot
Senior Policy Analyst Matthew Glans examines efforts by several states to add work requirements to their Medicaid programs. “Implementing Medicaid work requirements would be a good first step for Medicaid-expansion and non-expansion states toward helping to limit the rising costs of Medicaid,” Glans wrote.

The Oregon Experiment—Effects of Medicaid on Clinical Outcomes
https://www.heartland.org/publications-resources/publications/the-oregon-experiment--effects-of-medicaid-on-clinical-outcomes?source=policybot
This article from The New England Journal of Medicine examines Medicaid outcomes in Oregon. Oregon gave researchers the opportunity to study the effects of being enrolled in Medicaid (compared to being uninsured) based on data from a randomized controlled trial, the “gold standard” of scientific research. The results showed no improvement in health for enrollees, but it did reveal better financial protections for patients and increased medical spending.

The Value of Introducing Work Requirements to Medicaid
https://www.americanactionforum.org/research/value-introducing-work-requirements-medicaid/
Ben Gitis and Tara O’Neill Hayes of the American Action Forum examine the value of work requirements and argue more work requirements are needed in other safety-net programs, including in Medicaid.

Don’t Wait for Congress to Fix Health Care
https://www.heartland.org/publications-resources/publications/dont-wait-for-congress-to-fix-health-care
Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs or submit even more ambitious requests for waivers to the Department of Health and Human Services, an option the Trump administration has encouraged.

Maine Food Stamp Work Requirement Cuts Non-Parent Caseload by 80 Percent
http://www.heritage.org/welfare/report/maine-food-stamp-work-requirement-cuts-non-parent-caseload-80-percent#_ftnref36
Robert Rector, Rachel Sheffield, and Kevin Dayaratna of The Heritage Foundation examine Maine’s food stamp reforms and discuss how they could act as a model for other states. “The Maine food stamp work requirement is sound public policy. Government should aid those in need, but welfare should not be a one-way handout. Able-bodied, nonelderly adults who receive cash, food, or housing assistance from the government should be required to work or prepare for work as a condition of receiving aid. Giving welfare to those who refuse to take steps to help themselves is unfair to taxpayers and fosters a harmful dependence among beneficiaries,” the authors wrote.

Welfare Reform Report Card: A State-by-State Analysis of Anti-Poverty Performance and Welfare Reform Policies
https://www.heartland.org/publications-resources/publications/2015-welfare-reform-report-card?source=policybot
In 2015, The Heartland Institute published an updated version of its Welfare Reform Report Card. This report card compiles extensive data on five “inputs” and five “outputs” of state welfare and anti-poverty programs and assigns a final grade to each state for its welfare policies.

The Work Versus Welfare Tradeoff: 2013
https://www.heartland.org/publications-resources/publications/the-work-versus-welfare-trade-off-2013-1?source=policybot
The Cato Institute estimates the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia. The study found welfare benefits outpace the income most recipients can expect to earn from an entry-level job, and the income gap between welfare and work may actually have grown worse in recent years.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lindsey Stroud, a state government relations manager at The Heartland Institute, at lstroud@heartland.org or 312/377-4000.

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