CMS has sent a letter to state Medicaid directors with additional guidance the agency will use when reviewing waiver applications for states to implement work requirements for some Medicaid beneficiaries. Specifically, several states have expressed interest in some type of work requirements for “non-disabled” adults.

Each state will be required to submit a waiver  under Sec. 1115(a) of the Social Security Act, which will then be reviewed and approved by CMS. Stakeholders have been expecting the administration to become friendlier to reforms, including work requirements and expanded use of health savings accounts (HSAs). Both approaches were included in Administrator Verma’s Medicaid reform work with the state of Indiana, prior to her confirmation as CMS Administrator.

Below are highlights from the guidance document on expectations for work requirement programs:

• Work requirements do not necessarily mean people will lose coverage entirely. States will have flexibility to require work (or “community engagement”) as a condition of eligibility, coverage, receipt of enhanced benefits or reduced premiums or cost sharing.
• States must develop “reasonable accommodations” for and cannot deny coverage to certain populations. CMS acknowledges that some recipients may not meet the requirements to classify as “disabled” for purposes of qualifying for Social Security disability payments, but do have an illness or injury that is protected by other federal laws, such as the Americans with Disabilities Act. States will be expected to develop plans to ensure that those individuals are not denied access to care through the work requirements. Additionally, if an individual meets the work requirements for either the Temporary Assistance for Needy Families (TANF) or the Supplemental Nutrition Assistance Program (SNAP) then they are exempt from additional Medicaid work requirements. Finally, exemptions are required for full-time students, adults needing to care for dependent children, and others.
• States must provide support to beneficiaries to help meet work requirements. States will be expected to provide support services (e.g. job training, child care assistance, transportation, etc.) to individuals required to meet work requirements, but may not use Medicaid funding to do so.
• Individuals with substance abuse disorders may not lose access to treatment. States may not deny coverage for treatment to substance abuse disorders to individuals diagnosed with the disorder. States may either count time in treatment as credit towards work requirements, or may carve-out substance abuse disorder treatments from the rest of Medicaid coverage.
• States may not accrue savings from reduced enrollment. States may not accrue savings resulting from reduced enrollment due to work requirements. Any money “saved” must be redirected back to the Medicaid program so that overall spending remains stable.

Work requirements have been a controversial topic, with some stakeholders questioning their effectiveness. However, a large majority of Americans support such requirements, so they may not be politically difficult to implement. A couple of things to watch for:

• How much does it cost to develop and administer work requirements relative to the money “saved”? It will be administratively burdensome to develop and implement these requirements at the state level. Similar programs with drug testing and TANF recipients have shown that states spend more money administering requirements than they realize in savings.
• How large of a population will be impacted? A recent analysis completed by Kaiser Family Foundation showed that the majority of “non-disabled” adults would meet various exemptions outlined the guidance, such as needing to care for dependent children, or being a full-time student.

Stay tuned to see how these reforms play out. States with work requirement waiver proposals in the pipeline include Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, Mississippi, New Hampshire, Utah, and Wisconsin.

If you have questions about how this could impact you or your business, contact Melissa Andel, director of health policy, at melissa@appliedpolicy.com or 202-558-5272.