Medicaid Work Requirements Wouldn’t Increase Employment and Could Imperil Future Labor Market Participation

The House debt ceiling bill includes work requirements for certain Medicaid recipients. The requirements would apply to enrollees who do not have dependents and who are 19 to 55 years old, physically and mentally fit for employment, not pregnant, not enrolled in an education program, and not participating in a drug or alcohol treatment and rehabilitation program. Under the House bill, these Medicaid enrollees would have to work or participate in community service or work programs for at least 80 hours per month to remain eligible for benefits. Most of those exempt from the work requirements would need to provide evidence to maintain eligibility, often including medical documentation, and states would have to pay for the additional paperwork and additional medical visits. 

Prior research has shown that Medicaid work requirements do not increase employment rates. Rather, beneficiaries who lose eligibility generally become uninsured. Since Medicaid coverage substantially increases access to care for otherwise uninsured populations, withdrawing coverage leads to reductions in the care people receive. Medicaid also provides financial protection to beneficiaries and medical providers, reducing bankruptcies and evictions for individuals and uncompensated care for providers.

For this post, we looked at the patterns of care used by people likely to lose Medicaid benefits under the work requirements to illustrate what the provision would mean to beneficiaries, care providers, and the Medicaid program.   

Most Beneficiaries Are Working or Qualify for Exemptions

Using the 2019 Medical Expenditure Panel Survey, we estimated that about 14 million of the 68 million Medicaid enrollees who were enrolled for at least four months in that year fell into the relevant age range and did not have dependents. Most of them worked more than 20 hours per week. About 5.7 million reported not working or working fewer than 20 hours.

Of this small group, many would qualify for an exemption from work requirements: 2.4 million were enrolled in Medicare or the Supplemental Security Income program and 1.2 million reported that they had activity limitations. Finally, 0.4 million people would be exempt because they were pregnant or were attending school full-time. Consequently, of the original 14 million, the majority (about 12.3 million) would be exempt from the work requirements. 

Administrative Hurdles Would Lead Many to Lose Coverage

Even though most beneficiaries would be exempt from work requirements, nearly all those in this group would need to document their exemption and states would incur costs to recertify them. Prior estimates suggest that the administrative costs to states of redeterminations could amount to over $300 per enrollee annually, excluding the costs of additional medical visits to prove disability. 

Research suggests that many beneficiaries who would be exempt from work requirements would fail to prove their continued eligibility because of the administrative burden of doing so. For example, those who have a work limitation and are undergoing treatment for mental health conditions or substance use disorders may find it difficult to go through the process because of their conditions. We found that among the 1.2 million beneficiaries who would likely be exempt from requirements because of a work-limiting health condition, more than two-thirds used behavioral health services.  

Impacts of the Work Requirements on Individuals, Providers, and States

Among the minority of beneficiaries subject to work requirements and unlikely to receive an exemption (an estimated 1.7 million people in 2019), many (38%, or 660,000) did not use any Medicaid services at all over a 12-month period. This means that there are few savings to be achieved by disenrolling this population.

About 4 percent of this group (or 63,000 individuals) used only emergency or inpatient hospital services. It’s likely they would have used these services even if they were not covered by Medicaid. However, if they were disenrolled from Medicaid due to work requirements, the costs of their care would be borne by hospitals and contribute to the substantial medical debt held by households. Research has shown that in states that expanded Medicaid to cover more people, uncompensated care costs fell by 45 percent, leaving those states with less than half of the per-capita levels of uncompensated care in states that didn’t expand. Medicaid expansion also halved the amount of medical debt sent to collection by health care providers.

Just over one-fifth (or 360,000) of those who would be subject to work requirements and unlikely to receive an exemption had ambulatory visits and/or prescriptions for a mental health or substance use condition, though they did not report that their activity was limited because of such a condition. For example, 10.5 percent (or 180,000) had filled prescriptions for antidepressants, 6.5 percent (or 111,000) for anticonvulsants, 3.3 percent (or 54,000) for anxiolytics, and 1.5 percent (25,000) for antipsychotics. About 1.3 percent (or 22,000) of those in the group had a substance-related disorder. Withdrawing access to mental health and substance use treatment for this group is unlikely to increase their participation in the labor market and could generate other social costs. 

About 15 percent (or 260,000) of this group used Medicaid only for a preventive care visit to a primary care practitioner. Many people would forego these cost-effective services if they were uninsured, potentially impairing the health of the labor force. 

Work Requirements Wouldn’t Work as Intended in Short or Long Term

In explaining the work requirements, House Speaker Kevin McCarthy said, “It’s time for Americans to get back to work.” The evidence suggests that most Medicaid beneficiaries targeted by the work requirements are already working and the requirements would not increase workforce participation among the others.

Instead, the work requirements would reduce people’s access to mental health and substance use treatment services and preventive care, thereby harming vulnerable Americans. They also would increase the amount of uncompensated care provided by hospitals, as well as states’ administrative costs. Most importantly, work requirements wouldn’t expand the labor force in the short run and would diminish workforce capacity in the long run.