In January of 2018, the Trump administration sent out letters to state Medicaid directors that outlined how they could impose a work requirement on Medicaid beneficiaries.  This would be the first time that program eligibility would be linked to employment in the history of the 50-year-old insurance program.  Ten states, led by Kentucky, are already poised to impose new employment restrictions as soon as the federal governments grants permission.

Almost from entering office, President Donald Trump has made cutting back on bloated entitlement programs one of the priorities of his administration.  He campaigned on the repeal of the Affordable Care Act and has repeatedly issued budget proposals that cut funding to state Medicaid programs.  This latest letter indicates that the administration wants to make employment a key eligibility requirement which should shrink the beneficiary population and the Medicaid budget.

In 2016, 63 percent of Medicaid’s $553 billion budget came from the federal government, with the rest paid by states.  Almost 74 million people were covered through this program that is primarily for poor, disabled and elderly Americans.  Since the Affordable Care Act expanded Medicaid eligibility in 2010 by raising eligibility in participating states up to 138 percent of the federal poverty level, more than 15 million Americans have been added to the program.

• Millions could lose coverage—According to one study of the Medicaid population in the 10 states ready to enact a work requirement on Medicaid beneficiaries, almost 6.3 million people are at risk of losing coverage. Given that there are at least three more states also considering adding a work requirement, millions more could be in jeopardy of losing benefits. The actual number who lose coverage would, of course, depend on the exact nature of the employment requirement, but in light of the fact that 59 percent of Medicaid enrollees already work, any new requirement would only affect a fraction of the population. States are likely to continue issuing benefits to those beneficiaries that are disabled, pregnant, attending school, enrolled in job training or actively seeking a job, but the details will be determined by each state.
• Delayed implementation—The Trump administration is still considering state requests to implement a work requirement, and some officials have said that approval could come as soon as the end of 2018. It is, however, almost guaranteed that as soon as the first state issues new employment requirements, opponents will file a legal case to quash it. The law that established Medicaid did not include a work component, but instead was intended to promote health in underprivileged households.  The Centers for Medicare and Medicaid Services (CMS) has taken months to fashion a policy that would equate working with improved health in an effort to withstand legal challenges, but it is likely that it will take some time for the courts to adjudicate the initial cases and their subsequent appeals.

• Could lower deficit—Although there are too few details to know how much a new work requirement might save state and federal governments, there is a strong likelihood that fewer beneficiaries will pare away at the program’s costs. Because Medicaid is jointly funded by federal and state budgets, in 2016, the federal government’s expenditure was $565 billion, less than the $672 billion on Medicare. However, state governments spent an addition $331 billion to fund their programs. If millions are barred from enrolling due to inability to fulfill an employment requirement, there is little doubt that the expenditure for Medicaid will drop. The Congressional Budget Office projects that a work requirement for Medicaid could save $880 billion over ten years.

On the other hand, critics argue that the work requirement may hurt the deficit over the long term.  Because most Medicaid recipients that can work, already do, this new policy will only push people off health coverage.  Most of these are poor and will likely forgo health coverage as a result. Ultimately this could lead to more sick people who are incapable of finding employment, lowering tax revenue and placing a greater financial burden on public health systems.

• Improve Medicaid’s performance—Medicaid is currently considered one of the least effective health insurance programs in the modern world. The program spends almost $7,000 per beneficiary every year, and health outcomes are virtually equivalent to those with no health coverage. Expanding the program may have shifted the financial burden of treating the poor from hospitals to state and federal governments, but it did little to improve the health of new enrollees. While it might be optimistic to believe that fewer beneficiaries might improve the health of those who remain enrolled, at the very least, a reduction in the population should alleviate some of the financial strain on the system.
• Greater burden on public health—As the number of people eligible for Medicaid shrinks, the uninsured population should rise. This will undo many of the changes that the Affordable Care Act sought to enact, including a reduction in costly hospital visits.  As the number of people without health coverage increase, more people will avoid checkups and treatment for ongoing health issues, inevitably producing a sicker population in the long run.  This will lead to more uninsured people visiting emergency rooms which is one of the most expensive health care options.  Unfortunately, many of these ER visits will remain unpaid by poor patients that might once have been covered under Medicaid, producing an enormous financial strain on health care organizations and destabilizing an already fragile public health system. It is almost certain that this will create higher health care costs for insured hospital patients, and higher premiums for everyone as insurers to seek to recoup lost profits.

New changes to the largest government health insurance program in the nation is always fraught with unforeseen consequences, but it is almost inevitable at this point that employment will become an eligibility criterion for Medicaid enrollees in some states.  To learn more about how a work requirement may affect your health plan, please visit Boost Health Insurance.