Assessing the Damaging Impact of Medicaid Work Reporting Requirements in McCarthy Bill

The Medicaid work reporting requirement provisions contained in Section 321 of House Speaker McCarthy’s draft debt ceiling bill released yesterday are a radical attempt to cut federal funds for Medicaid and will threaten coverage for millions of low-income people — not because people aren’t working but because they fail to jump over a whole new set of bureaucratic hurdles.

The bill requires all states to create a whole new system of complex and invasive red tape that tens of millions of low-income people will have to wade through to continue to access Medicaid.  If someone doesn’t meet these new requirements, the bill bars any federal Medicaid funding to help cover that person, with states forced to either disenroll them or have to pick up all of the coverage costs without any federal Medicaid funding.  As a result, states will have little choice but to terminate coverage, likely leaving many people uninsured, exposed to medical debt and going without needed care.  States could always cover people not eligible for Medicaid at 100 percent of their cost – this is not new.  But history and common sense make clear that states simply cannot afford to do so, as any examination of the insurance status of the expansion population prior to enactment of the Affordable Care Act would show.

Those of us who follow Medicaid policy very closely saw a less draconian version of this work reporting requirement briefly implemented in Arkansas in 2018 before a federal court stepped in to stop it. In just a few short months, 18,000 Arkansans lost coverage which equated to 23% of the group affected. The Speaker’s proposal actually goes farther than the Arkansas policy in numerous ways including applying the work reporting requirement to the entire Medicaid population, not just the expansion group, and not exempting the medically frail and people with disabilities on SSI.

Subsequent research published in the New England Journal of Medicine found that 97% of those in the age group affected by the new rules should have been exempted or deemed compliant so most of those losing coverage should have remained enrolled. This study also found that the uninsured rate went up in Arkansas for the impacted age group.  Moreover, access to employer sponsored coverage did not increase and there was no increase in employment, with employment rates actually declining. Other negative consequences were observed such as half of those affected reporting serious problems in paying medical debt and more than half saying they had to delay care or access to needed medications due to cost. The research also found that most people in Arkansas were confused about what the requirement was and whether it was in place or not, let alone whether they qualified for an exemption and how to get one.

The Speaker’s bill intentionally perpetuates inaccurate stereotypes about people who receive their health insurance through Medicaid. The vast majority of those who can work do — 93% according to the Kaiser Family Foundation in the Medicaid expansion group are either workers, caregivers, students, or unable to work due to illness.

The bill includes a list of exemptions that states would have to restructure their entire eligibility systems to implement; it subjects those on Medicaid to intense scrutiny of many aspects of their personal lives, and it puts medical professionals in a very difficult position. One of the exemptions offered is to have a doctor or other medical professional declare that you are “physically or mentally unfit for employment”. So doctors would be asked to either decide that patients are incapable of doing any work at all (i.e. entirely disabled) in order to help them keep their health insurance – or be the cause of their patients losing their health insurance. Busy and overtaxed medical professionals will now also be asked to take on this additional burden.

There is no requirement that states create systems to automatically implement some of the exemptions (and the proposal certainly does not provide any funding to states to set such systems up).  There is no discussion of how individuals would seek exemptions and how they would demonstrate they qualify for them, or how they show they meet the work reporting requirements.  It is therefore certain, as the brief but disturbing experience in Arkansas shows, many people who are exempt or in compliance will end up getting disenrolled and become uninsured.

Moreover, if enacted, this new complex and punitive administrative structure would be imposed on states by the federal government in the midst of an already massive Medicaid administrative undertaking to “unwind” the continuous coverage protections in place during the COVID-19 public health emergency, which is just kicking off now. So states would be mandated to create a complex set of new bureaucratic requirements and apply them to everyone in their Medicaid program. Mistakes will happen and people will fall through the cracks.

The Speaker’s bill has it backwards – having Medicaid actually support people’s ability to work when they can get their health conditions addressed. Taking it away will only make it harder for them to work. Low wage workers who are working in temporary, part time or seasonal employment, or in sectors like landscaping and hospitality, are rarely offered affordable, comprehensive health coverage by their employers. So they need Medicaid to be able to work.

One thing is for sure– if this provision were to be enacted, people will lose their health insurance and any so-called savings accrued from this proposal will result from just that.