Legislation passed by the U.S. House of Representatives this week to address the debt limit — known as the Limit, Save, and Grow Act (LSGA) — would require that adults ages 19-55 without dependents meet work requirements as a condition of Medicaid eligibility. History has shown this to be a failed policy — with negligible effects on employment status, onerous administrative burden for individuals and state agencies, and ultimately, people losing health insurance coverage and access to care.
New estimates from the Congressional Budget Office (CBO) and U.S. Department of Health and Human Services (HHS) offer compelling evidence to that end. CBO estimates that 15 million people will be subject to work requirements and that states will lose federal funding for about 1.5 million people, presumably because they will be unable to provide compliance documentation. CBO assumes states will pick up the total cost for some of these people rather than terminating them immediately. HHS estimates that at least 21 million people, most of whom are working or exempt, are at risk of coverage loss and care interruption because they cannot navigate the reporting and documentation rules.
As part of the bill, states will be audited, and federal funding denied to those who fail to comply. These audits would occur long after care is provided, meaning states could be subject to a “clawback” — meaning funding could be rescinded retroactively. Neither the CMS or HHS estimate considers the uncertainty states will experience as a result of the bill’s audit and clawback rules and the impact of that uncertainty on states’ decisions to cover certain populations and potentially expose themselves to financial loss.
We have seen firsthand the consequences of Medicaid work requirements. Using Medicaid’s unique federal demonstration authority, the Trump administration encouraged states to pursue compelled work experiments; the results underscored the harshness and irrationality of such rules. New Hampshire, for example — a state with virtually no unemployment — halted its experiment before it started upon learning that two-thirds of affected beneficiaries would immediately lose coverage because they could not understand the reporting rules. Arkansas launched its experiment in June 2018. By the time it was stopped by the federal courts, research showed that nearly 18,000 adults — one of four people included in the experiment — had lost Medicaid coverage, without any gains in employment or workplace benefits. Furthermore, the number of uninsured people in the state increased. Among those affected, nearly 97 percent either were working when they lost Medicaid or qualified for an exemption.
Since its enactment nearly 60 years ago, Medicaid has differed fundamentally from other types of insurance that depend on avoiding adverse selection — that is, people enrolling and using coverage when they urgently need care. Rather than avoiding risk, Medicaid embraces it. Unlike other insurers, Medicaid allows vulnerable Americans to secure care when needed. While many people have Medicaid coverage on an ongoing basis, many more enroll when an immediate and urgent need arises, such as pregnancy, an accident, or life-threatening illness. Individuals who seek coverage must be allowed to apply when they need care and must be promptly enrolled if eligible. Furthermore, coverage can begin up to three months prior to the date of application, so that hospitals and other providers do not delay the immediate provision of care.
Medicaid is not only the nation’s largest public insurer. It is also the nation’s single largest public health program and a crucial first responder, a point driven home during the COVID-19 public health emergency. The model would be completely upended were states required — at the risk of losing federal funding — to withhold coverage from adults who could not prove they were working or exempt before enrolling.
Sometimes, policymakers must act with only limited information. But this is not one of those times. We know the effects such a destabilizing law will have on people, state governments, and the health care system as a whole.