On January 11, 2018, the Centers for Medicare & Medicaid Services (CMS) released a letter to State Medicaid Directors announcing a commitment to support section 1115 demonstration projects that include work or community engagement requirements. This will be the first time in the fifty year history of the Medicaid program that work requirements will be permitted. CMS Administrator Seema Verma signaled this direction in remarks to state Medicaid Directors in November: “Believing that community engagement requirements do not support or promote the objectives of Medicaid is a tragic example of the soft bigotry of low expectations consistently espoused by the prior administration. Those days are over.” The letter acknowledges a shift from prior agency policy, but states that it “is anchored in historic CMS principles that emphasize work to promote health and well-being”.
Created in 1965, Medicaid is the largest government healthcare program, covering close to 72 million Americans. The majority of Medicaid beneficiaries are eligible because they are children, blind or disabled. The Affordable Care Act also expanded Medicaid to low-income adults without children. Thirty-one states and the District of Columbia have expanded Medicaid to individuals with household income up to 138% of the federal poverty level. Section 1115 of the Social Security Act permits the Secretary of HHS to waive certain statutory requirements for an experimental, pilot, or demonstration project that is likely to assist in promoting the objectives of the Medicaid program. Historically, section 1115 demonstration projects have been used to expand Medicaid coverage. This policy would allow states to apply a condition unrelated to prior eligibility categories.
States have requested to implement demonstration projects to test whether beneficiary health is improved by using work or community engagement requirements as a condition of:
- Receiving additional or enhanced benefits; or
- Paying reduced premiums or cost sharing.
CMS cites to research linking work to positive health outcomes to support the position that work and community engagement requirements will promote the objectives of the Medicaid program. Specifically, CMS believes the requirements will further the health and well-being of beneficiaries. In addition to work requirements, the guidance indicates states’ could identify other activities that promote health and wellness. For example: community service, caregiving, education, job training, and substance use disorder treatment. Notably, CMS signaled certain eligibility categories should be exempt from work and community engagement requirements, such as pregnant women and the medically frail. CMS also advises states to consider high unemployment in certain areas and references the opioid epidemic in suggesting accommodations for individuals with opioid addiction and other substance use disorders.
CMS will examine each demonstration project on its own merits and will provide states with flexibility to design approaches to accommodate specific populations and resources. The guidance encourages states to align the parameters of their demonstration with existing work requirements for Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program. Aligning requirements across programs “would streamline eligibility and could reduce the burden on both states and beneficiaries and maximize opportunities for beneficiaries to meet the requirements.” While noting states must identify beneficiary supports like child care assistance and transportation, CMS is clear that the guidance does not modify the services eligible for matching Federal funds. States with approved demonstration projects will be required to conduct outcomes-based evaluations.
Legal challenges to this policy are expected and critics believe work requirements are contrary to law and not permitted by the Medicaid statute. They also suggest that any savings or alleged benefits to beneficiaries from work and community engagement requirements are outweighed by the administrative burden and implementation costs to states. Prior research from the Kaiser Family Foundation and professors at the University of Michigan suggest the overwhelming majority of adults in Medicaid are from working families and that the majority of the remaining Medicaid beneficiaries are disabled or suffer from illness, are caretakers or students, or are unable to work or retired.
There are ten states that have requested section 1115 waivers to permit work requirements or community engagement activities: Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, New Hampshire, North Carolina, Utah, and Wisconsin. In recent days, Alabama and South Dakota have signaled an intent to file similar waiver requests.