You probably won’t find many glass beakers, test tubes, or Bunsen burners within the offices of state lawmakers, but that doesn’t mean there isn’t a good bit of experimentation being discussed within these “laboratories of democracy.” The concept of states as laboratories goes back to the early part of the 20th century when Supreme Court Justice Louis Brandeis used it to describe how a state could “if its citizens choose, serve as a laboratory…and try novel social and economic experiments without risk to the rest of the country.” This oft-cited metaphor illustrates that not all states are the same – and a policy that works well in one state, might not be effective in another.
Seven states have submitted plans to experiment with their Medicaid programs by adding a work requirement for beneficiaries. Section 1115 of the Social Security Act gives the US Department of Health and Human Services (HHS) authority to approve experimental projects and demonstrations that promote the objectives of Medicaid and the Children’s Health Insurance Program.
So far, Arkansas, Indiana, Kentucky, Maine, Utah, and Wisconsin have pending waiver applications with the Centers for Medicare and Medicaid (CMS) that seek to tie Medicaid eligibility to work requirements. Arizona has announced its intention to submit a waiver amendment that includes a work requirement. In its proposal, Kentucky says its work requirement is “designed to provide dignity to individuals as they move toward self-reliability, accountability and, ultimately, independence from public assistance.” Our recent paper on state-led Medicaid reform efforts examines such work requirements. To date, no state has a work requirement for Medicaid beneficiaries.
CMS has indicated a willingness to approve work requirements through waivers, and the administration has indicated that it supports work-requirement provisions, which already are required by the Supplemental Nutrition Assistance Program (SNAP) and Transitional Assistance for Needy Families (TANF). However, while the secretary of HHS has significant latitude to allow states to experiment with their Medicaid programs, a waiver allowing a work requirement is likely to face legal challenges.
Concerns and opportunities for health plans
It is still too soon to know how a work requirement might impact margins for Medicaid managed care plans. The institution of a work requirement creates a new alignment between Medicaid managed care plans and their members. Meeting the requirement helps ensure that the member will continue to receive health care coverage, and that the health plan will continue to receive capitation payments.
Proposed work requirements would impact only a percentage of the Medicaid population, as the existing proposals would exclude adults who are medically frail or unable to work. However there is some concern that enrollment could be suppressed if the broader Medicaid population thinks it is affected.
Some states are projecting that the introduction of a work requirement will lead to a drop in overall Medicaid enrollment. Kentucky’s waiver, for example, estimates Medicaid enrollment would decline by about 80,000 (12 percent) of its total adult enrollment by the end of the five-year waiver period. At a minimum, a work requirement could lead to more churn among beneficiaries as people lose coverage for non-compliance. Some people might lose coverage for a while, and then gain it back when they find a job, or otherwise fulfill the work requirement. As a result of this churn, Medicaid managed care plans could face higher administrative costs (e.g., processing enrollments/disenrollments, sending welcome kits and identification cards, handling claims pre- and post-eligibility) and loss of investment in clinical programs. Carriers might also need to invest in systems that can connect with states to ensure up-to-date employment data.
Unemployment can impact health
Beyond the economic impact of not working, not being able to keep a job or gain steady income is one of the eight key health-related social needs recently outlined in a report from the Deloitte Center for Health Solutions. The study examines efforts among hospitals and health systems to address health-related social needs and activities.
Helping a non-disabled Medicaid beneficiary meet a work requirement could fit into a health plan’s social determinant strategy. People who are employed, as a population, tend to be healthier than those who are unemployed. While many people can’t work because they are ill or disabled, there is evidence that not working can contribute to poor health outcomes.
Some health plans are addressing social determinants. In 2012, WellCare Health Plans, Inc., a Medicaid managed care organization, made free General Educational Development (GED) testing available to its eligible Medicaid members in Georgia. The company has since expanded the program to three other states, and is considering further expansion. WellCare recognized that many social determinants factor into the health of an individual, family, and community, and wanted to help members remove financial barriers that could prevent them from furthering their education and employment opportunities.
Indiana’s pending waiver explicitly requires managed care plans to develop member incentive programs designed to promote employment. The state intends to determine whether member incentives increase participation in various employment and training programs. “Ultimately, these efforts to improve employment rates are critical to improving member health (including addressing the drug-abuse epidemic) and reducing overall poverty,” according to the proposal.
If approved by CMS, states could let people meet a work requirement by volunteering. Helping members connect to volunteer opportunities could help them strengthen relationships with community partners, which also could help advance the plan’s social determinants strategy. Health plans might also consider developing their own job training programs, building relationships with job placement services, and embedding work-seeking assistance into their care-management programs.
As more states look to experiment with their Medicaid programs, all eyes are squarely on CMS, which would need to approve any work requirements. In the meantime health plans will need to assess the potential impact of a work requirement on their membership and develop win-win strategies that help their members ensure their employment status, which can allow them to retain their eligibility for health insurance.