Improving Medicaid Through Work & Community Engagement

For the first time in Medicaid’s 52-year history, the federal government is allowing states to require recipients to pursue work, education, or community engagement to maintain medical benefits. Supported by 67 percent of likely Pennsylvania voters, this reform would be a tremendous step forward in creating a pathway to prosperity for Pennsylvanians.

Background

For more than a decade, states have sought flexibility from the federal government to restructure Medicaid. Now the largest single program in Pennsylvania’s budget, Medicaid is a matching program. Pennsylvania receives $1.08 in federal dollars for every state dollar spent. Medicaid’s current design deters work because recipients lose all benefits if they earn one dollar above income limits. Such an arrangement punishes success and contributes to the cycle of generational poverty.

• Before the Affordable Care Act (ACA), Medicaid served adults in extreme poverty, the disabled, the elderly, pregnant women, and children.
• Now, under the ACA Medicaid expansion, Medicaid is a fundamentally different program with resources split between healthy adults up to 138 percent of the poverty level ($16,753 in 2018), low-income children and those with complicated health needs.
  • The change in eligibility prompted Arizona, Indiana, and Pennsylvania to request work requirements, via a waiver, for healthy adults receiving Medicaid. In every case, those waivers were denied.
• On January 12, 2018, the Department of Health and Human Services (HHS) granted Kentucky a Medicaid waiver to encourage work & community engagement requirements for healthy adults.
  • On February 2nd, HHS granted Indiana a similar waiver.
• Eight states have pending community engagement waivers: Arizona, Arkansas, Kansas, Maine, New Hampshire, North Carolina, Utah, and Wisconsin.
  • At least five non-Medicaid expansion states (Alabama, Kansas, Mississippi, South Carolina, and South Dakota) and one expansion state (Ohio) are writing waivers.
• If not for Governor Wolf’s veto of House Bill 59, Pennsylvania would be in the process of submitting a waiver to help half a million people gain employment.

Promoting the Goals of Medicaid

Medicaid’s stated goal is to ensure access to necessary medical services and, “to help such families and individuals attain or retain capacity for independence or self-care.” On both counts, the program has failed.

• Medicaid does not guarantee access to health care.
  • Research has shown private insurance provides higher-quality care than Medicaid. In some cases, Medicaid patients endure worse health outcomes than the uninsured. Helping individuals transition to employer insurance or alternative models like direct primary care and health sharing ministries better achieve Medicaid’s goal of access of medical care.
• Medicaid is not a pathway to independence.
  • Since Medicaid expansion Pennsylvania’s poverty rate has remained unchanged while enrollment has gradually increased. Since FY 2014-15, Medicaid’s population increased more than 20 percent, including the addition of more than 700,000 healthy adults under expansion. This is especially concerning given Pennsylvania’s aging population and rising demand for Medicaid’s long-term care services.
• This is not the first time Medicaid administrators have asked states to consider changes outside of medical benefits to improve patient health.
  • In 2015, Centers for Medicare & Medicaid Services (CMS) encouraged states to apply for waivers to fund housing-related services since permanent housing can lead to better health outcomes. Work and community engagement are not only associated with positive health outcomes, including lower levels of depression and hospital admission rates, but they also equip recipients to become independent.

Protecting the Sick and Disabled

As healthy adults gain work experience, increase their incomes, and require less assistance, more resources will become available for those most in need.

• Despite Medicaid expansion, many in Pennsylvania are still in need.
  • About 14,000 individuals, including 5,000 with emergency needs, are waiting for community-based intellectual disability services due to limited Medicaid funds.
  • Medicaid expansion under the ACA exacerbated the problem by adding more than 700,000 healthy adults to the system. ACA’s perverse funding formula creates a strong incentive for states to divert resources from the truly needy.
• Requirements to pursue work, education, or community engagement could rectify this problem.
  • According to Census Bureau reports, 52 percent of healthy adults on Medicaid do not work and just 16 percent are working full-time.
    • The Foundation for Government Accountability estimates nearly 13 million adults could transition out of Medicaid through work & community engagement reforms, freeing nearly $1 trillion over ten years for disadvantaged populations.
  • State work and community engagement waivers narrowly apply to healthy adults (19-64) without children and who don’t attend school full-time. In other words, sick and disabled individuals, students, and pregnant mothers remain exempt from the requirement.
  • Similarly, Pennsylvania can customize “carve-outs” to protect vulnerable populations not traditionally covered by Medicaid, such as exemptions for those receiving substance abuse treatment.

Reducing Poverty

Similar work and community service requirements in other major welfare programs, such as Temporary Assistance for Needy Families (TANF) and Food Stamps, lifted individuals out of poverty.

• People living in poverty have seen their incomes rise as a result of these reforms.
  • Within a year of leaving the food stamp program in Maine, the income of healthy adults rose 114 percent, with the average worker earning more than the federal poverty level.
  • In Kansas, stronger work requirements for TANF lead to thousands of families doubling their income within a year, offsetting lost benefits and boosting local economies.
  • In Pennsylvania, the Department of Human Services estimates 490,000 Medicaid recipients could rejoin the workforce to enhance their incomes and reinvest in their local communities. That’s the population of Harrisburg, Lancaster, Allentown, Erie, Scranton, and Reading combined.
• Individuals have also seen a rise in employment opportunities and medical care.
  • Volunteering is a critical piece of helping individuals combat poverty. Communities with high poverty or unemployment rates benefit from volunteers to bolster non-profit services. Volunteers simultaneously gain valuable work experience and relationships that assist in long-term employment.
  • Volunteering to gain access to medical services has been successful. The Muskegon Volunteer for Dental Care program in Michigan offers free basic dental services in return for volunteer work at local non-profits.

Making Medicaid Sustainable

• Without reform, Medicaid’s precarious finances will leave all Pennsylvanians worse off.
  • Medicaid spending is growing at a rate of 5.7 percent, outpacing the state’s 2 percent economic growth. Without reform, Pennsylvania will be forced to divert resources from other government services or reduce health-provider payments and benefits.
• Policymakers can implement work and community service requirements without large administrative costs.
  • States are already equipped to implement CMS-recommended work & community engagement reforms since they mirror food stamp requirements.
• While working and re-engaging in the community are essential tools, more can be done to create a seamless path from Medicaid to independence. A block grant of federal Medicaid funds would allow Pennsylvania to create a payment system to help families gradually afford the cost of health insurance.
• Health care reforms, such as improving price transparency, expanding the flexibility of HSAs and eliminating coverage mandates, are also essential to reducing health care costs and broadening access to care