McCarthy Bill Would Radically Change Disability Standards for Medicaid and Reduce Coverage for Persons with Disabilities

As my colleagues Joan Alker and Edwin Park recently discussed, Section 321 of Speaker McCarthy’s debt ceiling bill, passed on a party-line vote in the House on April 26, 2023, would impose mandatory work reporting requirements on Medicaid nationwide, burdening states and worsening the health of millions of people. The Congressional Budget Office estimates this provision would cut federal Medicaid spending by nearly $109 billion over 10 years, cause 1.5 million low-income people to lose their Medicaid coverage and 600,000 people to become uninsured, with CBO likely underestimating the damaging impact. But did you know it would also be particularly harmful for people with disabilities and a radical departure from how disability programs work today?

First, it’s important to know there is a lot of false information going around ignoring the reality of the actual words in the bill generally. Contrary to what you may be hearing in the rumor mill:

  • The bill creates a huge new administrative mandate on states, which they will have to implement while struggling with administering a historic Medicaid unwinding.
  • There is nothing optional about this for the states. They will have to spend billions of dollars to create more red tape and implement the work requirements, and then when they lose billions of dollars of federal funding for enrollees that are ineligible, their only “option” will be to pay 100% of the costs themselves. States can’t and won’t do this. And of course, states always have the option to spend their own money to provide insurance!
  • The work requirement in the legislation is written to not be eliminated by waivers. There are multiple reasons why states may not be able waiver away the requirement – but they could try and make it worse for populations such as parents.
  • The work requirement is not limited to only the Medicaid Expansion category. And the exemptions the bill provides are narrower than any Medicaid work requirement proposal we have seen. For example, it does not exempt individuals eligible through pregnancy in their postpartum period. And there is nothing requiring states to automatically exclude those who may qualify for exemptions or create systems facilitating exemptions on an automatic basis.

This is what the words in the bill say – the reality of what the House voted on. And note, this isn’t even getting at all the inherent flaws with work reporting requirements, which as we saw in Arkansas, did not increase work and resulted in large percentages of people losing their health insurance – including workers, parents, students, and people with disabilities. If you take away only one conclusion, it should be this: work reporting requirements can’t be fixed.

But one of the most troubling misperceptions about the House-passed McCarthy bill has been the bill’s impact on people with disabilities. Make no mistake about it: the actual text of this bill is devastating for people with disabilities, and would be a severe regression in processes and coverage for people with disabilities.

First of all, the bill is so extreme that, unlike prior proposals, it offers no automatic exemption for individuals on SSI – people that have been formally identified as having a serious disability by the Social Security Administration and who automatically qualify for Medicaid in almost all states. There is also no automatic exemption for SSDI, individuals identified as medically frail, or any other individuals that are known to have a disabling condition.

While the bill asks states to use “databases” to verify compliance with the work requirement, it does not do the same for assessing exemptions. States would have a strong disincentive to risk adding automatic exemptions because they would be afraid of getting hit with disallowances for the spending on the exempted people – the federal government ordering the states to return funding because it wasn’t used as stipulated in the law.

Even if some states tried to implement an auto-exemption, many states would not, either because they don’t want to or can’t afford to implement yet another administrative process – subjecting millions of people with disabilities to potential termination. But even the states that try to implement auto-exemptions would be dependent upon CMS allowing it (and we don’t know who will be in power in 2025) and there is no guarantee that a court might not stop them for going beyond the law. And of course, even if a state ran this gauntlet – it might take years to get the auto-exemption implemented.

Long story short: the bill doesn’t try to identify people with disabilities in a remotely efficient or sensible way. What does the bill propose instead? It exempts individuals “physically or mentally unfit for employment, as determined by a physician or other medical professional.” That’s it. The preposterous policy in the bill is that all individuals, including an individual who has been determined to have a disability and has been on SSI for the past 20 years, should go out and have a doctor certify they are “unfit” to work. Countless people will be unable to get such a letter, for a myriad of reasons (including challenges directly related to their disabling health condition), and have their insurance terminated.

In practice, the policy is absurd. Some doctors don’t even write such letters, and any doctors who do will be heavily burdened by the new red tape and the ethical dilemma it creates for them. All doctors will also be put in the impossible position of having to certify a patient is “unfit to work” or letting them lose their insurance. Doctors also generally have no training or expertise (much less interest) in certifying “readiness to work.” They will make guesses and assumptions and, in many cases, get it wrong if they even do it at all.

In principle, the bill fundamentally misunderstands the relationship between disability and work. This bill assumes there are only two possibilities: (1) being totally unfit for work or (2) working. But the official Social Security disability criteria make no such black and white distinction, in recognition of how many people with disabilities make great efforts to work. The reality is that many individuals with disabling conditions want to work, do work, and have fought very hard for the supports that enable them to do that.

There are many different individuals with different types and degrees of disability. Many people with even a formal disability diagnosis work some hours every month; in fact, there is a category of Medicaid for workers with a disability (passed through bipartisan legislation) that specifically promotes this. Would such individuals be required to get a note from their doctor saying they are unfit to work because they don’t meet the minimum hours? The system the McCarthy bill would create might actually create a barrier to some individuals with disabilities working, because they need the “unfit” designation to have insurance.

At the end of the day, the House’s work reporting requirement would upend years of work, much of it done by people with disabilities fighting for their rights, to develop fair and reasonable ways to define disability and support work for people with disabilities. The McCarthy bill proposes a radical and restrictive new way to identify disability that would result in many people with disabilities losing their health insurance. Congress should be clear with the public if it truly intends to tear down and the long-standing definition of disability, at the expense of access to health care for people with disabilities.

Leonardo Cuello is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.