More Than 100,000 Michigan Residents Nearly Lost Medicaid Coverage Under Work Requirements

Congress is debating adding work requirements to Medicaid, which will come with inevitable consequences. As I know from experience, implementing these requirements is costly, complicated, and will cause many people to lose their health insurance even though they are working, looking for work, or cannot work.

In its first term, the Trump administration approved requirements that tied Medicaid eligibility to work in 13 states, including Michigan. In 2018, Governor Rick Snyder signed the work requirements into law, and the federal government quickly approved them. When Gretchen Whitmer took office in 2019, I became director of the Michigan Department of Health and Human Services (DHHS). While Governor Whitmer opposed the requirements, it was my job, alongside dedicated civil servants, to implement them as effectively as possible. And that is what we did, until a federal judge invalidated Michigan’s waiver in March 2020, deeming it inconsistent with the Medicaid statute.

Supporters of work requirements assert that they “provide a work incentive to a large number of Americans without greatly disrupting the program itself.” However, Arkansas’ effort to implement a Medicaid work requirement in 2018 had foundered. The state’s website had failed repeatedly, people received letters they did not understand, and many people never heard about the new rules at all. The ranks of the uninsured ultimately grew by 18,000, and studies showed no change in employment.

Michigan resolved to do better. The Republican state legislature met the governor’s request for funding and made important amendments to smooth implementation.The effort cost more than $30 million — and would have cost more than twice that, but for the March 2020 court ruling. Complying with the law and implementing the requirements involved:

• reprogramming the state’s Medicaid eligibility systems
• capturing employment and claims data
• modifying online application portals and written applications
• creating an automatic phone voice response system for work reporting
• establishing a call center
• launching a reminder campaign with text messages and outbound calls
• engaging the workforce to capture enrollees’ activities related to work
• developing outreach toolkits
• partnering with insurers, health providers, and community-based organizations to spread the word through regional forums, webinars, and other events
• hiring 43 new state employees to conduct verification and audit activities.

Beginning under Governor Snyder, Michigan had collaborated with the nonprofit Civilla to take America’s longest benefits application and make it a national model. DHHS trimmed 42 complex pages to 18 straightforward pages that 90 percent of recipients could complete, online or in person, in 20 minutes or less. DHHS used the same human-centered design principles to create simpler notices about work requirements. “Don’t lose your health coverage!” a key letter blared. These forms were good but also had their limits. One headline writer asked: “Michigan Medicaid rules change soon. Can cool envelopes help avoid confusion?”

The answer, it turned out, was yes and no. As I testified on the same day in March 2020 that work requirements were blocked, there were about 700,000 people in the Medicaid expansion population (i.e., the people who had become eligible for Medicaid under the Affordable Care Act). Using administrative data, the state figured that about 600,000 could keep their coverage because they were either meeting the requirements or exempt (e.g., because they were medically frail). Of the remaining 100,000 people at risk for coverage loss, about 20,000 people were able to report through the state’s phone and online systems that they were not subject to coverage loss. Thus, when I testified, the state was prepared to notify about 80,000 people that they would lose coverage if they did not report they were complying with the law. The state estimated that coverage losses would ultimately have topped 100,000 due to more people entering the Medicaid expansion over time and ultimately losing eligibility (for example, those who chose to do community service could only keep coverage for three months). That means more than one of seven people in Michigan’s Medicaid expansion would have lost coverage.

In a sense, that was pretty good. In 2019, a Manatt Health analysis of Michigan data predicted a coverage loss as high as 183,000 people, based on Arkansas data. Coverage losses likely would not have been that bad, thanks to DHHS’s intensive efforts.

Even so, more than 100,000 Michiganders — more than the population of Flint — were on track to lose health coverage. The evidence indicates that far fewer were actually ineligible for benefits. For example, in Arkansas less than 4 percent of those targeted by work requirements weren’t already working or likely exempt. Applying a similar percentage in Michigan would have meant less than 30,000 people losing coverage, instead of more than 100,000. Even with our efforts, we knew that many people simply did not hear about the law or would not manage to respond.

Michigan was on the brink of major coverage losses even with many favorable conditions: 1) a governor committed to minimizing coverage loss; 2) a legislature ready to supply funding; 3) a good fiscal environment; 4) state data systems capable of matching earnings, claims, and eligibility information; 5) a health department with strong partners and design skills; and 6) low unemployment, just 3.8 percent in January 2020, which minimized the at-risk population.

Few, if any, states have these conditions today. In Michigan, unemployment is at 5.5 percent and trending upward. Luke Farrell, who led the United States Digital Services team that worked with states on postpandemic Medicaid challenges, told me that many states have far less capacity than Michigan for administrative data matching. Those deficits, cuts in federal support for states, and a weakening economy could drive coverage losses from work requirements far higher than Michigan anticipated in 2020.

Work requirements will require a massive investment of states’ time and money. The Americans who lose insurance through no fault of their own will suffer the most.