Medicaid Work Requirements in the Time of Unemployment

Between March 1 and June 6, a total of 44.5 million Americans filed initial claims for unemployment insurance.  These massive job losses will result in a dramatic increase in the number of Americans without health insurance coverage, threatening the ability of unemployed Americans to afford needed care for themselves and their families during the COVID-19 pandemic.  Fortunately, there is a coverage safety net in the U.S., of which Medicaid is a critical part, as April enrollment data confirm.  Unfortunately, both Medicaid and low unemployment have been taken for granted.  There’s no better illustration than Medicaid work requirements.

Since January 2018, the Secretary of HHS has approved “demonstrations” of imposing work requirements on Medicaid beneficiaries in ten states  (AZ, AR, IN, KY, MI, NH, OH, SC, UT, WI).  None of these states is currently implementing.  One state (KY) has withdrawn its “demonstration” altogether.  The federal courts have overturned the Secretary’s approval of three others (AR, MI, and NH); the Secretary and two states (AR and NH) are likely to appeal those decisions to the Supreme Court.  Four states (AZ, IN, UT, and WI)  have suspended or postponed the imposition of work requirements indefinitely.  The remaining two states (OH and SC) are not scheduled to start implementation until the end of this year or beginning of next, and in any event will not be able to implement so long as the maintenance of effort (MOE) protections  under the Families First Act are in effect.

At the ideological core of these “demonstrations” is the requirement that, in order to become or remain eligible for Medicaid, an individual must report working a minimum number of hours (commonly 80) each month.  Of course, in order to report work hours, people must be able to find work—a high-degree-of-difficultly exercise when jobs are scarce and unemployment is high.  One might think that these work requirement “demonstrations” would account for a high unemployment scenario.  One would be wrong.

The CMS guidance that launched these “demonstrations” in January 2018 recognized that States “will need flexibility to respond to the local employment market by phasing in and/or suspending program features, as necessary. A state may need time to establish supports for beneficiaries in regions with limited employment opportunities, for example, or localities facing particular economic stress or lack of viable transportation.”  But the guidance left to each state the decision as to whether to exempt individuals in high unemployment areas from work requirements.  And it did not require that states suspend work requirements in the event of a statewide economic downturn.  Nor did the guidance address the possibility of a national economic downturn.

That downturn has arrived.  In May, the nation’s unemployment rate was 13.3 percent (16.2 percent after adjusting for misclassification). Some 21 million Americans were out of work.  The April unemployment rates for the states with approved demonstrations were also grim:  AZ (12.6 percent); AR (10.2 percent); IN (16.9 percent); MI (22.7 percent); NH (16.3 percent); OH (16.8 percent); SC (12.1 percent); UT (9.7 percent); WI (14.1 percent). (State-by-state data for May are not yet available).  Given the relentless increase in unemployment insurance claims, the national and state unemployment numbers for May will almost certainly be worse.  To put these rates in context, the natural rate of unemployment—i.e., a measure of unemployment that doesn’t depend on changes in demand for goods and services—is 4.4 percent for the second quarter of 2020.

Despite the skyrocketing unemployment rate, the Secretary has yet to hit the pause button on any of the approved “demonstrations.”  Instead, he continues to press his case in the courts.  This is unfortunate—CBO projects that the unemployment rate will average 11.5 percent this year and 9.3 percent in 2021—but it is not entirely surprising.  When Congress’s expert advisors, the Medicaid and CHIP Payment and Access Commission (MACPAC), asked the Secretary to temporarily suspend his approval of the Arkansas “demonstration” in November 2018 because  the coverage loss had hit 8,000, he refused.  (The unemployment rate in Arkansas in 2018 was 3.6 percent).

In approving the work requirements “demonstrations,” the Secretary required only that states make their own judgment as to whether to take high unemployment into account.  This boilerplate language from the initial approval of the Kentucky “demonstration” in January 2018 was the model for all of those that followed: Ensure the state will assess areas within the state that experience high rates of unemployment, areas with limited economies and/or educational opportunities, and areas that lack public transportation to determine whether there should be further exemptions from the community engagement requirement and/or additional mitigation strategies, so that the community engagement requirement will not be unreasonably burdensome for beneficiaries to meet.”

Only one state—South Carolina—has specified a local unemployment rate (8 percent or above) that would exempt all individuals living in that area from meeting work requirements in order to qualify for Medicaid coverage.  And only South Carolina included an automatic exemption for all individuals if statewide unemployment was high (8 percent or above).  The state’s rationale for setting the threshold at 8 percent is unclear; the lowest unemployment rate the state has ever recorded is 2.4 percent (January 2020), the highest is the current 12.1 percent (April 2020), which obviously triggers a blanket statewide exemption.  Neither the state’s application nor CMS’s approval explained why it was reasonable to expect individuals to find work if the statewide unemployment rate was 7.9 percent.

To be clear, including a statewide circuit breaker for high unemployment, or adopting a national circuit breaker, would not save these “demonstrations.” The Medicaid statute simply does not allow states to condition eligibility on reporting work hours, and the Secretary does not have the authority to rewrite the statute through the use of section 1115 waiver authority, regardless of the unemployment rate.  That is true in good economic times (pre-COVID) as well as bad (now).

But it does speak volumes that a 2018 policy initiative ostensibly designed to support “state efforts to enable eligible individuals to gain and maintain employment“  would completely ignore the possibility of a recession that throws tens of millions of Americans out of work (the Great Recession of 2007-2009, when the unemployment rate reached  10.0 percent, was not that long ago).  And that it would ignore evidence that work requirements would contribute to health disparities. Then again, perhaps Medicaid work requirements were never really about work.  Perhaps they were really about weaponizing red tape to kick low-income parents and adults off Medicaid while trying to stigmatize Medicaid. If so, as our colleague Joan Alker has pointed out, they work—which is precisely why they have no place in the Medicaid program.