Waiving Away Medicaid

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New eligibility requirements for Medicaid threaten those who need coverage the most.

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For all the focus on “Medicare for all,” the more immediate issue for many Americans is whether they will remain eligible for Medicaid.

Originally enacted in 1965 as an afterthought to Medicare, the Medicaid program is now the largest health insurance program in the country. It covers nearly 75 million people, including more than one-third of U.S. children and nearly two-thirds of nursing home residents.

Medicaid is a life-saving program: It has enabled millions of low-income people to access necessary medical care, and in doing so, improved their health outcomes and lengthened their lives. Moreover, it is remarkably cost-effective. One study estimated that expanding Medicaid only costs between $327,000 to $867,000 per life saved.

Today, however, thousands of Americans are losing their Medicaid coverage due to a previously obscure waiver provision in the Social Security Act known as Section 1115.

Under the guise of promoting state-level innovation, the Trump Administration is using this authority to impose unprecedented eligibility hurdles on Medicaid beneficiaries, with the predictable—and likely intended—consequence that thousands of them are losing health insurance coverage.

 First, here is some background: Medicaid is a joint federal-state program that offers health insurance coverage to very low-income people. The federal government and the states share responsibility for funding the program. Although states administer Medicaid, they must comply with various federal requirements to be eligible for federal funding, including offering coverage to certain populations and maintaining minimal cost-sharing and no premiums.

Historically, Medicaid only offered funding to states to cover a select set of populations, including low-income children and their parents, pregnant women, the elderly poor, the blind, and other people with disabilities. Most states’ Medicaid programs did not cover childless adults.

The Patient Protection and Affordable Care Act (ACA) changed this state of affairs by offering generous funding to states that expanded their Medicaid programs to cover individuals up to 138 percent of the federal poverty level. This provision—together with other features of the law, such as new streamlined enrollment procedures—dramatically increased Medicaid enrollment and helped to drive the nation’s uninsured rate to the lowest level in U.S. history.

Nevertheless, in the view of the Trump Administration, the Medicaid expansion represented “a clear departure from the core, historical mission of the program” because it extended coverage to “able-bodied adults.” Although the term “able-bodied adults” has no precise demographic definition—and no legal mooring in the law governing the Medicaid program—those who use the term do so to refer to people who are capable of working and are thus, in their view, undeserving of government aid.

Seema Verma, the current Administrator for the Centers for Medicare and Medicaid Services (CMS), has argued that the growth in Medicaid enrollment is not a cause for celebration, and that “for able bodied adults, we should celebrate helping people move up, move on, and move out” of the Medicaid program.

After Congress failed to pass legislation in 2017 that would have repealed the ACA and scaled back the Medicaid program, the Trump Administration quickly turned to Section 1115 waivers to restructure Medicaid.

Under Section 1115 of the Social Security Act, the Secretary of the U.S. Department of Health and Human Services (HHS) has the authority to waive conditions that would otherwise be attached to Medicaid funding for a state if the Secretary determines that a given state initiative—though failing to satisfy those conditions—is an “experimental, pilot, or demonstration project” that is “likely to assist” in promoting the objectives of the program. Because Section 1115 is designed to enable state experimentation, both HHS and the participating states are required to conduct evaluations of their waiver initiatives.

On January 11, 2018, CMS issued a letter to states encouraging them to apply for Section 1115 waivers to impose work requirements and other eligibility conditions on Medicaid beneficiaries. The very next day, CMS approved a waiver allowing Kentucky to impose such requirements. More waivers quickly followed—as of April 1, 2019, CMS has approved waivers that contain work requirements in ten states.

The precise details of these waivers vary, but they include a few main elements: requiring that “able-bodied adults” complete 80 to 100 hours per month working or engaging in other “community engagement” activities, including employment, training, or volunteering; imposing premiums; and instituting lockout penalties that exclude individuals from Medicaid coverage if they fail to comply with eligibility conditions or reporting requirements.

For Medicaid beneficiaries, fulfilling these requirements may involve overcoming a daunting array of administrative hurdles. To maintain eligibility, beneficiaries subject to reporting requirements must document their time spent working or engaging in other qualifying activities, or else prove that they qualify for an exemption. Navigating the complex reporting requirements and obtaining the relevant documentation would be challenging for anyone, let alone for people struggling with poverty, mental illness, substance abuse, or homelessness.

In one particularly Kafkaesque twist, Arkansas initially provided that beneficiaries could report their work hours through only a bug-prone government webpage between the hours of 7 in the morning and 9 at night, despite the fact that Arkansas has one of the lowest levels of Internet access in the United States.

These waivers, which aim to reduce Medicaid coverage, diverge sharply from those approved by previous administrations.

The Clinton, Bush, and Obama Administrations used Section 1115 waivers to enable states to expand coverage to new populations or to experiment with new methods of delivering care to patients.

The Obama Administration allowed states to implement some restrictive provisions—such as premiums—but only as part of new coverage expansions. And the Obama Administration specifically refused to approve work requirements for Medicaid, concluding that they were inconsistent with the objectives of the Medicaid Act.

Officially, CMS has defended these waivers on the basis that they are “demonstration projects” designed to “test and evaluate innovative solutions to improve quality, accessibility and health outcomes.” CMS has justified work requirements in particular on the basis that they will improve beneficiaries’ health by encouraging them to find work, because employment is associated with better health.

This justification fails on several grounds.

First, the fact that health and employment are correlated does not mean that working improves health outcomes. It is more likely that the reverse is true: that being healthy makes it easier to work.

Second, work requirements have proven ineffective at increasing employment over the long-term when implemented in other contexts.

Third, CMS’s justification ignores the fact that very few Medicaid beneficiaries are unemployed despite being able to work. The majority of Medicaid beneficiaries already work, and almost all others have a physical or life condition that renders them unable to do so. Even if work requirements did improve health by increasing employment, they would benefit only a very small subset of Medicaid beneficiaries, at the cost of disenrolling a much larger group of people who are either already working or should be eligible for an exemption but are unable to meet the reporting requirements.

The official defense of these waivers as “demonstration projects” is also belied by the fact that several states were reportedly granted waivers without having in place plans to evaluate the impacts of these waivers on key outcomes—even though they are legally required to have such plans.

In March 2019, a federal district court judge vacated the approval of Medicaid waivers in Kentucky and Arkansas after finding that HHS did not adequately consider whether these waivers would advance Medicaid’s core objective of “furnishing medical assistance.” (The Trump Administration has since appealed these decisions.)

Critics view the waivers as a thinly veiled means of culling people from the Medicaid program. Officials from Arkansas, the only state as yet to implement work requirements in Medicaid, announced in January 2019 that over 18,000 people were forced off of Medicaid after failing to provide evidence of compliance with the new eligibility restrictions there. Notably, these coverage losses extend well beyond those adults who might be considered “able-bodied.”

These numbers will only grow as more states implement similar regulations. The Trump Administration’s 2020 budget calls for Medicaid work requirements to be implemented nationwide, which analysts predict would cause 1.4 to 4 million people to lose coverage.

Meanwhile, as thousands of low-income Americans lose health insurance coverage, CMS continues to approve more waivers. Administrator Verma has defended her agency’s actions by arguing that “people moving off of Medicaid is a good outcome because we hope that means they don’t need the program anymore.”

There is little reason to believe that her hope is justified.

Gabriel Scheffler

Gabriel Scheffler is a regulation fellow in the Penn Program on Regulation at the University of Pennsylvania Law School and a research fellow in the Solomon Center for Health Law and Policy at Yale Law School.

This essay is part of a 12-part series, entitled What Tomorrow Holds for U.S. Health Care.