Are Medicaid work requirements legal?

Dylan Matthews has a good piece at Vox on the Trump administration’s zeal to require most people to work in order to receive health insurance benefits through Medicaid. Matthews notes that “[a] Medicaid work requirement would be a huge departure from current practice . . . [that’s] also likely to be ineffective, difficult to enforce, and maybe even illegal.”

It’s the last of these that I’d like to focus on: the possibility that work requirements might be illegal under the statutes governing Medicaid. Because work requirements don’t further Medicaid’s objective of extending healthcare to the poor, aren’t truly experimental, and would harm Medicaid recipients, there’s a good chance that work requirements for Medicaid are not lawful.

Here’s the background: Medicaid was created in 1965 as a little-noticed sidecar to Medicare in order to provide medical assistance to low-income people and other vulnerable populations. The law sets out certain “mandatory eligibility groups” that must be covered by state Medicaid programs, including low-income pregnant women and mothers, the blind, the disabled, and other medically needy groups.

The states and federal government partner to run Medicaid together: the federal government finances a sliding percentage of the program, and the states administer it. When Congress passed Obamacare in 2010, Medicaid eligibility was expanded to include everyone earning less than 133 percent of the federal poverty line; however, the Supreme Court ruled that this additional eligibility category was optional for the states.

States can request waivers from some of Medicaid’s requirements in order to conduct experiments and explore innovations in their programs. Section 1115 of the Social Security Act allows the Department of Health and Human Services to grant states waivers from the law’s requirements to conduct “any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of [Medicaid].”

In the recent past, conservative states have requested waivers to require that all able-bodied adult Medicaid beneficiaries are either working, actively seeking employment, or are in school. The Obama administration routinely struck down requests from states like Pennsylvania to attach work requirements to Medicaid benefits—a red line that the administration would not depart from while negotiating with red states over the Medicaid expansion. The Obama administration took the position that work requirements would be a fundamental departure from Medicaid’s tradition as a safety net program for all, regardless of employment status.

The Trump administration is eager to reverse this policy. Seema Verma is Trump’s head of the Center for Medicare and Medicaid Services. Before that, she was a healthcare consultant working closely states like Kentucky and Indiana (under then Governor Mike Pence) to redesign Medicaid programs, often including work requirements.

In March, Verma and Health and Human Services Secretary Tom Price wrote a letter to state governors welcoming requests to tie Medicaid to employment status. “The best way to improve the long-term health of low-income Americans is to empower them with skills and employment,” the letter asserted, saying that the department was willing to “approve meritorious innovations that build on the human dignity that comes with training, employment and independence.”

The department will soon have that chance. Kentucky, Pennsylvania, and Indiana have all made requests with the Trump administration to impose work requirements on Medicaid eligibility. Arizona and Arkansas are expected to submit their own requests soon.

As much as Price and Verma would like to approve these requests for ideological reasons, it’s not clear that they have the legal authority to do so. A fresh new report from the Congressional Research Service looks at the issue of the legality of Medicaid work requirements under Section 1115 waivers. CRS concludes that the lawfulness of Medicaid work requirements is an open question. But there’s ample reason to think that any forthcoming approval from the Trump administration could be on shaky ground.

The administration’s decision granting or denying a Medicaid waiver can be reviewed and challenged in court to determine whether the decision was arbitrary or capricious. For waivers under Section 1115, courts primarily look at: whether the request is actually experimental; whether it “promot[es] the objectives of [Medicaid];” and whether administration officials thoroughly considered the goals of the waiver request, its impact on beneficiaries, and objections raised to the waiver.

Under this standard, a waiver to attach work requirements to Medicaid hardly looks like a sure thing. There are at least four reasons why:

1. Work requirements do not promote the objectives of Medicaid. The objective of Medicaid is to extend medical assistance to the needy. There’s no intuitive evidence that requiring people to hold gainful employment furthers this goal.

Indeed, the Obama administration believed that work requirements were completely unrelated to Medicaid’s goals. In a letter denying Arizona’s request for a waiver to implement Medicaid work requirements, the Obama administration concluded that work requirements “undermine access to care and do not support the objectives of the program.” To legally justify changing this position, the Trump administration will have to marshal evidence for a reversal.

Verma and Price articulate the goal of work requirements as promoting the “human dignity that comes with training, employment and independence.” But that’s way beyond the scope of the purpose of Medicaid. In fact, it’s much more aligned to the objectives of welfare programs like Temporary Aid to Needy Families and its predecessor, Aid to Families with Dependent Children.

If states want to experiment with conditioning safety net benefits on employment, they should seek waivers from TANF, not Medicaid. (And in fact, they’ve already done so.) Had Congress wanted Medicaid to be susceptible to these kinds of waivers, it would have incorporated some notion of work and independence into Medicaid’s objectives. Congress did not do so.

In fact, Congress very recently tried—and failed—to shoehorn employment into Medicaid. During the Republicans’ aborted attempt to pass the American Health Care Act to repeal and replace Obamacare, they introduced an amendment to permit work requirements in Medicaid. As CRS reports, “On March 21, 2017, a manager’s amendment to the AHCA was released which would additionally allow states to impose work requirements on non-disabled, non-elderly, non-pregnant individuals.”

AHCA made it out of committee, but was shelved because it could not secure enough support to pass the House. But the fact that Congress saw the need to amend the Medicaid statute strongly implies that the statute as presently constructed does not permit work requirements. The Supreme Court has said that there is a “general presumption” of statutory construction that “when Congress alters the words of a statute, it must intend to change the statute’s meaning.” If Medicaid as written already permitted state work requirements, then the proposed AHCA amendment would not have been necessary.

Of course, neither AHCA nor its amendment became law. The objectives of Medicaid on the books remain unchanged. And those objectives are not furthered by work requirements.

2. Work requirements violate Medicaid’s “mandatory eligibility groups.” As explained above, Medicaid’s statute lays out certain groups that must be covered by the states. Granting a Medicaid waiver for a state to implement work requirements would across many of these mandated groups.

This is most evident in states that have expanded Medicaid under Obamacare. The Medicaid expansion acts as a catch-all to insure everyone earning less than 133 percent of the poverty line, scooping up those low-income individuals not covered by one of the other mandatory eligibility groups. Work requirements are inconsistent with this part of the statute because they would deny coverage to those who are otherwise eligible but unemployed. Granting a work requirement waiver therefore cannot be squared with the text of the law.

3. Work requirements are not innovative or experimental. For years, states have sought and received waivers to institute work requirements for receipt of cash welfare benefits. And these experiments have not been effective at cutting poverty.

And while the Obama administration did deny state requests for mandatory work requirements for Medicaid, it did approve Pennsylvania’s 2014 request to implement voluntary work incentives in its Medicaid program. Similar requests for Medicaid are thus not truly experimental, as is required under Section 1115, because states have already had ample opportunity to study the effects of attaching work requirements to safety net benefits.

4. Work requirements are self-defeating and harmful to Medicaid recipients. The population of Medicaid recipients affected by work requirements is small. Nationwide, nearly 60 percent of all Medicaid recipients are already working. Among those who do not work, more than a third are ill or disabled; another 28 percent are caring for family; 18 percent are students; and 8 percent are retired.

The remainder could not find work or are not seeking work for other reasons. They account for just 4.5 percent of all Medicaid recipients.

But for this population, work requirements could be dire. Able-bodied unemployed individuals would be thrown off of their health insurance, causing them new difficulty to obtain medical treatment. This would be extremely detrimental to their health and wellbeing.

Moreover, work requirements may actually backfire—they likely hinder employment more than they promote it. That’s because Medicaid doesn’t discourage work. When Ohio expanded Medicaid, three quarters of unemployed enrollees said that having Medicaid coverage made it easier for them to find jobs.

*          *          *

Waivers for Medicaid work requirements are no legal slam-dunk. And it’s important for advocates and commentators to put this case before Health and Human Services. One of the factors that courts will consider is whether the Department considered and responded to the evidence in the administrative record. That means that Price and Verma must reckon with the shortfalls of work requirement waivers before going giving the green light to states.

That’s a green light that conservatives have long been eager to give. But in their quest to scold the poor, Medicaid work requirements might be more than the law can bear.

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