Why States Want Certain Americans to Work for Medicaid

Many people might soon be required to find employment in order to receive health care. But this policy has a fraught historical precedent.

The Centers for Medicare and Medicaid Services administrator Seema Verma
The Centers for Medicare and Medicaid Services administrator Seema Verma (Alicia Tatone; Michael Reynolds / EPA / Shutterstock)

The letters went out to governors on March 14, 2017. Seema Verma had recently been appointed by President Donald Trump as the administrator of the Centers for Medicare and Medicaid Services, the agency within the Department of Health and Human Services that oversees health-care programs for more than 130 million Americans. Verma and then–HHS Secretary Tom Price, also a Trump appointee, wanted to alert state leaders across the nation that a new era was dawning: Some people would be required to work in exchange for Medicaid benefits.

Ushering in this new regime was, in some ways, what Verma had spent her entire career seeking to accomplish. In 2001, five years after earning a master’s degree in public health at Johns Hopkins University, Verma founded a consulting company called SVC. The company, which exists now as HMA Medicaid Market Solutions, helps states adjust how Medicaid programs are operated and delivered. (Verma sold the company shortly after becoming CMS administrator.)

In 2010, SVC took center stage in state-level Medicaid reform when the Patient Protection and Affordable Care Act—Obamacare—gave states the option of expanding Medicaid, with a hefty federal subsidy, to people making up to 138 percent of the poverty line. (The current poverty line is $12,490 per year for individuals and $25,750 per year for a family of four.) In Indiana, Verma partnered with Mike Pence, who at the time was the state’s governor, to implement an expansion program called the Healthy Indiana Plan 2.0. Among other things, the program instituted a system of premiums, ranging from $1 to $27 per month, for the new Medicaid-expansion population.

Policy makers on the right applauded the move. But there was a consequence. Medicaid expansion in Indiana did give approximately 240,000 new people coverage, but in the years since it was implemented, portions of those eligible for benefits have been unable to pay their premiums. From 2015 to 2017, about 25,000 people in Indiana lost access to Medicaid.

In 2017, in her new position as CMS administrator, Verma gained the power to influence how every state administered its Medicaid programs.

In January 2018, for the first time since Medicaid’s creation, in 1965, Verma’s CMS gave permission to a state government to require certain citizens to work in order to keep benefits. The state was Kentucky, which planned to launch a work-requirement program this year. Details about who exactly would be subject to the requirement are still being ironed out. But according to Kentucky state officials’ estimates, at least 95,000 people would lose Medicaid coverage over a five-year period.

Then, in March, Arkansas received permission to introduce a work requirement—and Arkansas was faster out of the starting gate, inaugurating its effort in phases. Beginning last June, people on Medicaid in Arkansas ages 30 to 49 who earned at or below the poverty line had to find work or participate in activities such as volunteering or job training to continue receiving Medicaid benefits. Certain people were exempt, such as those who were medically frail or who had a dependent child. From June to December, more than 18,000 people lost coverage in Arkansas as a result of the new policy, according to the Arkansas Department of Human Services.

Medicaid advocates have not been quiet. Both HHS and CMS, along with Verma and Alex Azar II—who took over as HHS secretary after Price resigned following a scandal involving his use of chartered jets and military aircraft—were immediately the target of lawsuits seeking to overturn the work requirements. They were filed in the U.S. District Court for the District of Columbia on behalf of people in Arkansas and Kentucky, as well as those in New Hampshire, whose work-requirement mandate has just gone into effect.

The plaintiffs allege that work requirements contradict one of the two chief stated objectives of Medicaid, as laid out in the 1965 Social Security Act Amendments: to “furnish medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.”

For its part, the Trump administration argues that work requirements further the second objective of Medicaid: to provide “rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.” Verma and others maintain, in effect, that employment should be considered a form of rehabilitation that leads to financial independence.

A judge examining this rehabilitation interpretation has found that it stretches the statutory language considerably: In the first round of rulings on the lawsuits, earlier this year, Kentucky and Arkansas were told to go back to the drawing board. Still, other states have followed their lead undeterred. In January 2019, Indiana began implementation of its work-requirement program. Programs in Arizona, Michigan, Wisconsin, Ohio, and Utah have been approved by HHS but have not yet started. Alabama, Mississippi, Oklahoma, South Dakota, Tennessee, and Virginia have submitted plans and are awaiting the green light.

This push for work requirements isn’t new. Politicians and policy experts on the right have been promoting them for decades, and have successfully implemented them in other programs, such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP). The stated rationale is that work requirements will discourage dependence on welfare. In 1984, Charles Murray—who later wrote the controversial work The Bell Curve—published a book called Losing Ground, in which he claimed that welfare programs deter poor people from working, because welfare recipients know they can rely on government help instead. The book was the subject of heated criticism and debate.

As an era of work requirements potentially looms for Medicaid, it’s possible to look beyond conjecture at the likely impact. By now a significant number of studies have considered what work requirements for social programs do and don’t accomplish. Are the new policies a good-faith effort to help people help themselves? Are they simply a way of using supposedly good intentions to clamp down on entitlements? Are they a tool for whittling away the ACA? Are they all those things? This battle is going to be fought for years to come.

Medicaid covers more than 65 million people (not including those covered under the Children’s Health Insurance Program, or CHIP), at an annual cost of about $560 billion, which is borne by both the federal government and the states. All told, 36 states and the District of Columbia have opted to expand Medicaid under the ACA.

The way Verma has characterized it, the ACA moved millions of working-age, nondisabled adults onto Medicaid. She contends that CMS must give people more than a health service: “We owe our fellow citizens more than just giving them a Medicaid card. We owe a card with care, and more importantly a card with hope,” she said in a November 2017 speech to the National Association of Medicaid Directors. “Hope that they can break the chains of generational poverty and no longer need public assistance.” In this view, Medicaid—or, more precisely, the threat of losing it—is a tool to encourage people to provide for themselves.

This is where work requirements come in. Section 1115 of the Social Security Act lets states propose experimental projects that promote the twin objectives of Medicaid: providing medical care as well as services designed to guide people toward independence. Verma maintained in the 2017 speech that the Barack Obama administration’s refusal to approve work requirements for Medicaid on the grounds that they don’t satisfy the program’s objectives is an example of “the soft bigotry of low expectations,” a phrase coined by Michael Gerson, a speechwriter for President George W. Bush. (The phrase appears in Bush’s defense of the 2001 No Child Left Behind Act, which attempted to make additional federal aid contingent on better test-score results.) In other words, those who do not believe that low-income people can hold down a job and engage with their communities are making assumptions that have a way of proving self-fulfilling.

The argument over the statutory objectives of Medicaid is central when it comes to the actual conduct of government. Dustin Pugel, a policy analyst at the Kentucky Center for Economic Policy, believes that Verma’s case for the meaning of Medicaid’s second objective is inadequate. “The context of that part is really specific to physical rehabilitation,” he says. “It talks about folks who have some sort of ailment that is preventing them from a full, independent life, and Medicaid is meant to fill in the gaps so that people can get back on their feet.” In this light, the second objective is simply about achieving physical independence through medical care. It is not about withdrawing benefits to influence people’s behavior.

In January 2018, CMS announced in a letter to state Medicaid directors, written by Brian Neale, then the director of the Center for Medicaid and CHIP Services, that it would begin approving proposals that promote participation in community-engagement activities—working, volunteering, going to school, receiving job training—in return for Medicaid benefits. Neale cited research showing that higher earnings are positively correlated with a longer life span, that unemployment is generally harmful to people’s health, and that activities such as volunteering are associated with improved health and can lead to paid employment.

In Arkansas, the first state to implement work requirements, nearly 280,000 people are on Medicaid. About 69,000 are subject to the new requirements. Unless exempted, a person must log 80 hours of work or community activities a month and report those hours online or by phone. If, over a period of three successive months, a person fails to show that he or she has met the monthly threshold, Medicaid benefits will cease until the next calendar year.

The 18,000 Arkansas residents who lost their coverage last year failed to meet these work requirements for many reasons. Some people lost coverage for reasons beyond their control. Many simply didn’t know about the change or were confused by it. Others couldn’t navigate the website. A significant number didn’t have computers or reliable cellphone or internet access. As of February, just 11 percent of the 18,000 had reapplied for and regained coverage.

Last month, Secretary Azar testified during a Senate Finance Committee hearing that this small proportion of reapplications “seems a fairly strong indication that the individuals who left the program were doing so because they got a job [in] this booming economy.” But the Center on Budget and Policy Priorities, a liberal think tank, analyzed new Arkansas state data and found that, of the 18,000 beneficiaries who lost coverage, only 1,981 “had matches in the state’s New Hire Database, indicating they found work.” The analysis uncovered no evidence that the remaining 16,019 have found new jobs. (An HHS spokeswoman told Politico that Azar’s comments were not intended to be definitive.)

Arkansas’ second phase of work-requirement implementation began in January of this year and targeted two groups: 30-to-49-year-olds who earn from 101 to 138 percent above the poverty line, and 19-to-29-year-olds who make up to 138 percent above the poverty line. By March, “7,066 enrollees had one month of non-compliance with the requirements, and 6,472 enrollees had two months of non-compliance in the new calendar year,” according to a March 2019 report from the Kaiser Family Foundation.

If it weren’t for the recent string of lawsuits, Kentucky would have rolled out its own work-requirements plan by now. Kentucky’s January 2018 case involved 15 residents—represented by the National Health Law Program, the Southern Poverty Law Center, and the Kentucky Equal Justice Center—who sued HHS and CMS, naming Verma, Azar, and two other top officials. The group argued that the Kentucky plan does not fulfill the objectives of Medicaid and would put them and others “in danger of losing” their health insurance altogether.

In June 2018, the 15 residents won their case. Judge James Boasberg ruled that Kentucky had ignored Medicaid’s first objective—providing medical assistance, pure and simple—by disregarding the state’s own estimates that work requirements would kick at least 95,000 people off the Medicaid rolls. Kentucky had focused primarily on its broad interpretation of Medicaid’s second objective—furnishing rehabilitation and other services that lead to independence or self-care. Judge Boasberg vacated the approval of Kentucky’s plan and “remanded the matter to HHS for further review.”

In November, HHS approved Kentucky’s revised program. The state had made some changes, but what it resubmitted was largely identical to the first application. The consequences would be exactly the same: At least 95,000 people would still lose Medicaid coverage. The same plaintiffs, plus one new resident, sued Kentucky again. And in March of this year, they won for a second time. Kentucky’s governor, Matthew Bevin, had already warned of what could happen next. In January 2018, he had directed officials within the Cabinet for Health and Family Services to essentially un-expand Medicaid as soon as legally possible if any part of Kentucky’s Section 1115 waiver, which asked for work requirements, was prevented from being implemented.

Also in March of this year, and in the same court, the state of Arkansas lost a similar lawsuit brought against its existing work-requirement effort. On April 10, Justice Department attorneys appealed the decisions dealing with Arkansas and Kentucky on behalf of Verma and Azar—and HHS continues to push ahead. The New Hampshire case is still in its initial phase.

When asked to respond to the court rulings, CMS offered a statement that Seema Verma had made in March: “We will continue to defend our efforts to give states greater flexibility to help low income Americans rise out of poverty. We believe, as have numerous past Administrations, that states are the laboratories of democracy and we will vigorously support their innovative, state-driven efforts to develop and test reforms that will advance the objectives of the Medicaid program.”

As politicians and policy analysts on the right have claimed for decades, work requirements are intended to address work disincentives. If people know they can receive food, health care, and housing from the government, more or less for free, then why would they work? Recent data, however, suggest that only a small proportion of people who receive Medicaid benefits might avoid work simply because they don’t want to and don’t have to.

In January 2018, the Kaiser Family Foundation published its analysis of 2016 data on the 25 million Medicaid recipients aged 19 to 64, as reported in the March 2017 Current Population Survey, which interviews people in person and via phone to gather results. It found that 42 percent of those people worked full-time, and that 18 percent worked part-time. Of the 10 million remaining people who reported not working, 36 percent said it was because they were disabled, 30 percent said it was because they were taking care of their home or family, and 15 percent said it was because they were going to school. Six percent said they couldn’t find work, and 9 percent said they were retired; 3 percent reported “other” reasons. Based on these data, only about 2 million to 5 million people of the 25 million nonelderly people on Medicaid could even work in the first place, depending on families’ abilities to find other caretakers, come out of retirement, and so forth.

Over a two-year period, researchers at the Brookings Institution’s Hamilton Project collected data on the work status of people on Medicaid. They found that the way data had been gathered for a 2018 report by the White House’s Council of Economic Advisers—taking a nationwide snapshot in a single month—masked the fact that low-income Americans were continually entering and leaving the labor force, and doing so for many reasons, often temporary. A person might work nine months out of the year, but if he or she doesn’t work for three consecutive months, this person would still lose health care in Arkansas.

Although work requirements have been built into two major programs, TANF and SNAP, studies show that those requirements have not been wildly successful. When Bill Clinton ran for president in 1992, he promised to “end welfare as we have come to know it.” Four years later, he signed the Personal Responsibility and Work Opportunity Reconciliation Act—generally referred to simply as “Clinton’s welfare reform”—which ended a program known as Aid to Families With Dependent Children and replaced it with TANF. The new program introduced a limit on how long families could receive benefits as well as a requirement to work, and states could determine which adults would be subject to it.

In its 2017 study of TANF, the Kaiser Family Foundation looked at two groups of aid recipients: those who were and were not required to work. It found that people who had not been required to work were just as likely to be working five years later as those who had been subject to a work requirement—and sometimes were even more likely to be working. Later that same year, the Urban Institute released a report that looked at the first decade of TANF. It found that employment gains had been modest and had declined over time. Moreover, the requirements did not increase stable employment.

Intriguingly, there is evidence that what the Trump administration aims to accomplish by instituting work requirements is already happening without them. Medicaid expansion has had “positive or neutral effects on employment and the labor market,” according to another 2018 Kaiser Family Foundation report. It has not led to droves of people halting job searches in order to live off the government’s largesse. Instead, more people find work. Or volunteer. Or go back to school.

More than 80 percent of people on Medicaid in Ohio, for example, say that “coverage made it easier to work,” and 60 percent say that “coverage made their job search easier,” according to state data. The reason, the Kaiser Family Foundation report found, is that many adults on Medicaid who are not working are not working because of an illness or a disability that prevents them from doing the physically demanding tasks that most entry-level or low-income jobs require. Health care helps many of them manage those health issues well enough to participate in the labor force.

In the agency’s statement to The Atlantic, CMS did not address requests for comment on these studies.

Medicaid work requirements might not encourage more people to seek employment, but they do remove large numbers of people from health-care coverage. The result is especially severe for African Americans. The pattern is familiar: The Urban Institute found in its 2017 report that work requirements for TANF had a disparate impact on African Americans. States with higher concentrations of African Americans tended to have more severe sanctions for initial incidents of noncompliance, and African Americans were more likely to be sanctioned than their white counterparts, even when the form of noncompliance was the same.

Last May, Nicholas Bagley and Eli Savit, who teach law at the University of Michigan, argued in The New York Times that Michigan’s proposed work requirements for Medicaid discriminated against African Americans by exempting people living in high-unemployment rural counties, which are predominantly white. Michigan’s minority population tends to live in cities, such as Flint and Detroit, which have high unemployment but are embedded in low-unemployment counties.

In terms of access to health care, the ACA, including Medicaid expansion, has had the effect of narrowing disparities in coverage between people of color and other Americans for the first time in years. If work requirements for Medicaid accomplish nothing else, they will widen these disparities once again.