For over 30 years, Medicaid has encouraged work by parents, persons with disabilities, and others. You sure wouldn’t know it from the CMS Administrator’s repeated calls for “community engagement” by the “able bodied.”   But there it is, in plain view: section 1925 of the Social Security Act, Transitional Medical Assistance (TMA). TMA was designed to help parents move from welfare to work, so you would think it would be a central to any policy initiative to promote work. Yet if you read the fine print of the waivers that CMS recently granted to Kentucky and Indiana, you’ll see that they gut TMA.

This begs the question: are these waivers about supporting work, or are they about terminating coverage?

Let’s start at the beginning. In 1988, Congress enacted, and President Reagan signed into law, The Family Support Act  (P.L. 100-485), the welfare reform legislation of that decade. The Act included a number of policy changes, including job training and child care, intended to help parents move from welfare to work. TMA was one of these. It required states to extend Medicaid coverage for at least 6 months and up to 12 months for parents or caretaker relatives with dependent children losing cash assistance as a result of increased earnings, so long as they continued working and did not earn more than 185 percent of the Federal Poverty Level (FPL) — in today’s dollars, $38,443 for a family of 3.  

At the time, Medicaid eligibility for parents was largely tied to receipt of cash assistance (then known as Aid to Families with Dependent Children, or AFDC).  If a parent got a job (or a second job), or increased her hours at a job, she could lose both her cash assistance and her Medicaid coverage. The loss of the cash assistance would be offset by earnings from the job(s), but the loss of Medicaid coverage could often not be offset, either because the employer(s) did not offer health insurance, or because the parent could not afford whatever coverage might be offered. The potential loss of Medicaid coverage from taking that second job or increasing the number of hours was a significant disincentive to work, especially for parents with ongoing medical or prescription drug needs. By guaranteeing at least 6 months and up to 12 months of coverage as long the parent kept working, TMA reduced the work disincentive, promoting the transition from AFDC to the workplace.

Over the past 30 years, there have been major changes in cash assistance policy, notably the 1996 repeal of the AFDC entitlement and its replacement with the Temporary Assistance for Needy Families (TANF) block grant.

There have also been major changes to Medicaid, including the creation of the “section 1931” parents eligibility group in 1996 and the expansion in coverage for parents and other adults with incomes up to 138% of the Federal Poverty Level ($28,676 for a family of 3) that began in 2014 under the Affordable Care Act (ACA). Throughout all of these policy shifts, TMA has been a critical source of coverage continuity for millions of working parents; in 2011, it reached about 3.7 million working parents.  

Recognizing its importance as a work disincentive, Congress periodically extended TMA, which was initially authorized for only 10 years. In the 2009 American Recovery and Reinvestment Act (ARRA), Congress streamlined TMA for both states and beneficiaries, allowing states to waive reporting requirements for the second 6 months of coverage. In the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), TMA, with bipartisan support, was permanently extended. (Note that TMA applies to section 1931 parents, but not to parents in the Medicaid expansion population).  

Now that TMA is proven and stable, CMS is waiving it — of all things, in the name of lifting people out of poverty “to a better life.” In January, as part of the Kentucky Health “demonstration,” CMS waived TMA in order to allow the state to deny working parents TMA benefits for 6 months if they fail to pay required premiums, fail to provide information for annual redetermination, or fail to report a change in circumstances. In February, CMS approved Indiana’s request to terminate TMA for failure to pay required premiums, for failure to provide information at annual redetermination, or to for failure to comply with the state’s new work requirements (huh?). In both states, the termination of TMA benefits would apply to working parents during the initial 6-month coverage period (as well as the subsequent 6-month period), even though they are playing by the TMA rules.  

More TMA waivers may soon be coming to a theater near you — not just from Medicaid expansion states, like Kentucky and Indiana, but also from non-expansion states, where TMA is even more important. Because of the coverage gap and the extremely low eligibility levels for section 1931 parents in many non-expansion states, a parent could lose Medicaid due to a modest increase in earnings that leaves her in poverty and without health insurance. And as our colleague Jesse Cross-Call at the Center on Budget and Policy Priorities has pointed out, Alabama, a non-expansion state with an eligibility level of 18% of FPL ($3,740 per year for a family of 3) recently proposed a waiver that would slash TMA benefits in half.

It’s hard to see how gutting a benefit that reduces the disincentive to work will “lift parents up out of poverty.”  But perhaps encouraging work is not, in fact, the point of the exercise. Perhaps the point is cutting parents from Medicaid.  So if TMA stands in the way of terminating benefits to working parents who are playing by TMA rules, just waive it.  Never mind that Congress streamlined the benefit for states and working parents and made it permanent, and that waiving it moves in precisely the opposite direction. In short: watch what the Administrator waives, not what the Administrator says.