While new Medicaid waiver policies, such as work requirements, have been fervently debated, relatively little attention has been paid to how these policies might affect state delivery system reform efforts aimed at improving health and bending the cost curve. The court decision invalidating Kentucky’s work requirements — and the Centers for Medicare and Medicaid Services’ decision to reopen the comment period on the Kentucky demonstration — offers an opportunity to think about the intersections of waivers and delivery system reform.
Following the Trump Administration’s encouragement to states to consider new waiver policies that allow restrictions on coverage, to date 19 states have approved or pending waivers with coverage limitations. These include conditioning Medicaid eligibility on meeting work and community-engagement requirements and paying premiums, as well as “lockouts” from Medicaid as a penalty for failing to meet such requirements.
These policies will affect state delivery reforms in three principal ways.
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Continuity of Coverage Is Essential to Delivery and Payment Reform
A major focus of state Medicaid programs is to hold health plans and in some cases providers accountable for the quality and cost of care; however, plans and providers can only be held accountable to the extent that the people they serve remain eligible for and enrolled in Medicaid. While Medicaid coverage has become much more stable in recent years, the waiver policies will almost certainly increase instability.
Beyond the disruption caused by initial implementation, the new waivers are likely to lead to greater coverage instability on an ongoing basis. Several would impose premiums, some at levels higher than those previously approved, and yet a large body of research suggests many low-income families would be unable to pay them consistently. Fluctuating hours and unpredictable work schedules common to the low-wage job market also would make it difficult for some beneficiaries to consistently meet the work requirements. And work requirements would also likely lead to coverage losses for people who are working but don’t know that they need to report their work hours, don’t know how to report, or miss a deadline.1 Lockouts imposed as penalties would exacerbate instability.2 Arkansas’ experience is instructive: in the first month in which coverage could be terminated as a result of the newly approved work requirements, the state reports that at least 55 percent of the nonexempt expansion adults who were required to report lost coverage; these individuals reflected at least 17 percent of the adults potentially affected by the requirement.3
People with Complex Health and Social Needs Most at Risk
State delivery and payment reforms are often focused on people who have high health care needs and incur high costs; about 5 percent of all Medicaid beneficiaries account for nearly half (48%) of program spending. To improve care and potentially lower costs for such individuals, states are integrating physical and behavioral health services and strengthening care management. Increasingly, many are also addressing the economic and social circumstances that can adversely affect health and drive health care costs.
High-need, high-cost beneficiaries are particularly vulnerable to coverage losses as a result of the new waiver policies. Some may be exempt from work requirements, although there is considerable variation across states’ exemptions. But even those who are exempt will be at significant risk of coverage loss. Consider a homeless woman who suffers from serious mental illness. She might be unaware of a work requirement or that an exemption might apply. And even if she is aware, would she be able to manage the paperwork or the electronic portal to secure the exemption?
Safety-Net Providers Will Be Directly Affected
The new waiver policies will have a considerable impact on community health centers, safety-net hospitals, teaching and children’s hospitals, and others that serve a large share of Medicaid beneficiaries. These health care providers play a central role in Medicaid delivery system reform, with many moving to value-based payments and making investments to address the social determinants of health. Expansions in insurance coverage throughout the country, and particularly in Medicaid expansion states, have led to drops in uncompensated care and paved the way for these reforms.
The coverage gaps and losses prompted by the new waiver policies, however, are likely to reverse some of these gains. They also will place new burdens on physicians and clinics pulled into the work-requirement exemption process by what the American College of Physicians expects to be an overwhelming number of requests to complete medical forms.
Like other payers, state Medicaid programs have been experimenting with ways to improve care and control costs. The considerable unintended consequences that the new waiver policies will have on delivery system and payment reforms warrant careful consideration.