Medicaid Waivers: Public Health Consequences Under the Trump Administration

The election of Donald Trump has led to a dramatic shift in how states are using Section 1115 waivers in Medicaid and raises serious concerns for these programs, their populations, and public health. Waivers have been an important policy tool allowing states to modify, with federal approval, their Medicaid programs. Of the 36 states that have adopted the Medicaid expansion under The Patient Protection and Affordable Care Act (ACA; Pub L No. 111-148, 124 Stat. 855 [March 2010]), eight used a waiver. During the Obama administration, waivers were used largely by conservative state policymakers to align Medicaid with their political ideology. These states focused on applying the concept of personal responsibility and free-market principles in the program, such as increasing cost-sharing, introducing health savings accounts, and incentivizing healthy behavior programs among the newly eligible.¹ Other policies that that these states pursued in an effort to increase personal responsibility, such as work requirements, were rejected by the Obama administration.²

TRUMP ADMINISTRATION AND WAIVERS

The contrast in how the Obama and Trump administrations have leveraged Medicaid waivers is evident in what has been approved, who is affected, and what the consequences are for noncompliance. For example, the Obama administration approved healthy behavior incentive programs for Medicaid in four states. These programs are broadly similar, with the same target populations and similar financial incentives to encourage the newly eligible to engage in healthy behaviors, such as smoking cessation and primary care visits. Only one state, Michigan, included any consequence for noncompliance with their healthy behavior incentive program. Starting in 2018, all Medicaid enrollees in Michigan with incomes higher than 100% of the federal poverty level, as defined by the US Department of Health and Human Services, and are not medically frail have to either purchase a private plan on the health care marketplace or retain their Medicaid managed care plan and complete an annual healthy behavior requirement. Those who select the latter option and fail to adhere to the healthy behavior requirement would face termination of Medicaid eligibility.³ This is the only instance in which noncompliance with a healthy behavior incentive program implemented under the Obama administration resulted in Medicaid disenrollment.

The Trump administration has sought to reshape Medicaid through their approval of waivers. These efforts to modify Medicaid are partially driven by the failed efforts of congressional Republicans to repeal and replace the ACA in 2017. Many of the failed legislative efforts would have fundamentally altered the Medicaid program, changing the financing and eligibility of the program, as well as authorizing Republicans’ long-sought policy preferences for the program, including allowing work requirements for Medicaid populations.⁴ Work requirements condition eligibility in Medicaid on individuals either working, searching for employment, volunteering, or attending school and is a fundamental change to the program.

STATE PURSUIT OF WORK REQUIREMENTS

With the encouragement of the Trump administration,⁵ work requirements have been a popular policy option for conservative policymakers. Eight states—Arizona, Arkansas, Indiana, Kentucky, Maine, Michigan, New Hampshire, and Wisconsin—received approval to implement work requirements, with an additional eight states awaiting federal approval. A federal judge halted Kentucky and Arkansas' work requirements after ruling that they did not promote the objectives of the Medicaid program. The Trump administration rejected Kansas’ waiver application because it would impose a lifetime limit for failing to meet the work requirement, and Maine is no longer pursuing their work requirement after electing a Democratic governor. Among the states that received or are awaiting approval for work requirements, a clear trend is emerging toward increasing the severity of consequences for noncompliance and the populations included in the waivers (Table 1).

TABLE 1—

Overview of US Work Requirement Programs for Medicaid Eligibility, as of February 2019

State	Medicaid Expansion Status	Federal Approval	Work Required	Eligibility Levels for Adults	Consequence of Noncompliance
Alabama			35 h/wk (20 h/wk for parents or caregivers of small children)	0%–18% FPL, parents aged 19–59 y	Individuals have 90 d to become compliant or are disenrolled
Arizona	X	X	20 h/wk	0%–138% FPL, individuals aged 19–54 y	Termination of enrollment for failure to comply after 6-mo grace period
Arkansas	X	X	80 h/mo	0%–138% FPL, individuals aged 19–49 y	Noncompliance for 3 mo results in enrollment termination for year
Indiana	X	X	20 h/wk	0%–138% FPL, individuals aged 19–64 y	Individuals who do not meet criteria in 4 of the previous 12 mo lose enrollment for 1 y
Kansasa			Based on household size, between 20 and 35 h/wk	0%–38% FPL, individuals aged 19–64 y	Individuals can fail to meet requirements in 3 mo of 36-mo period and then are disenrolled
Kentuckyb	X	X	80 h/mo	0%–138% FPL, individuals aged 19–64 y	Noncompliance for 1 mo leads to enrollment termination until they meet requirements
Mainec	X	X	20 h/wk	0%–105% FPL, individuals aged 19–64 y	Individuals can fail to meet requirements in 3 mo of 36-mo period and then are disenrolled
Michigan	X	X	80 h/mo	100%–138% FPL, individuals aged 19–62 y	Noncompliance for 1 mo leads to disenrollment
Mississippi			20 h/wk	0%–100% FPL, individuals aged 19–64 y	Noncompliance for 1 mo leads to disenrollment
New Hampshire	X	X	100 h/mo	0%–138% FPL, individuals aged 19–64 y	Noncompliance for 1 mo leads to enrollment termination until they meet requirements
Ohio	X		20 h/wk	0%–138% FPL, individuals aged 18–50 y	Noncompliance for 1 mo leads to disenrollment
Oklahoma			20 h/wk	0%–45% FPL, individuals aged 18–50 y	Disenrollment after 3 mo of noncompliance
South Dakota			80 h/mo	0%–51% FPL, individuals aged 19–59 y	Disenrollment after 3 mo of noncompliance
Tennessee			20 h/wk	0%–98% FPL, individuals aged 19–64 y	Individuals must meet requirements 4 of 6 mo to retain eligibility
Utah	X		30 h/wk	60%–100% FPL for parents and 0%–100% FPL for childless adults, individuals aged 19–60 y	Disenrollment after 3 mo of noncompliance in a 12-mo period
Virginia	X		80 h/mo	0%–138% FPL, individuals aged 19–64 y	Individuals who do not meet requirements for 3 mo in 12-mo period will have coverage suspended
Wisconsin		X	20 h/wk	51%–100% of FPL, individuals aged 18–48 y	Participation in work requirements extends the length of time allowed on Medicaid

Note. FPL = federal poverty level, defined annually by the US Department of Health and Human Services.

^aWaiver rejected by Trump administration.

^bApproved by Trump administration but invalidated by court.

^cNewly elected Democratic governor pulled state out of waiver application after federal approval.

The consequence of failing to report the number of hours engaged in work or other activities is more severely and uniformly applied than in previous Medicaid waiver programs. Several states that implemented or are seeking to implement work requirements include a grace period before the consequences of noncompliance affect the Medicaid population. Yet, regardless of whether a state included a grace period in their programs, the practical effect of noncompliance was the same for every state seeking a work requirement—termination of Medicaid eligibility, which is largely a new penalty for Medicaid programs.

Disenrollment for not meeting the work requirement is exacerbated by having both Medicaid expansion and nonexpansion states pursuing these waivers. Wisconsin was the first nonexpansion state to receive approval for work requirements, and an additional five nonexpansion states are awaiting approval. This creates unique challenges for the Medicaid populations required to participate in the work requirement programs, particularly for individuals with the lowest incomes in nonexpansion states. Shifting participation in work requirement programs down the income bracket creates a paradox for individuals in nonexpansion states. If an individual works the number of hours required by the state, his or her income can exceed the already low Medicaid eligibility income limits in nonexpansion states. Therefore, both meeting and failing to meet the work requirement can result in individuals becoming ineligible for Medicaid.

POLICY IMPLICATIONS

Three important implications emerge from the shift in Medicaid waivers under the Trump administration. First, the consequence of not meeting the work requirement varies based on an individual’s income. Similar to the emergence of the Medicaid coverage gap, for individuals with incomes at or higher than 100% of the federal poverty level, the threat of losing Medicaid coverage is tempered by the availability of federal tax credits to purchase private health insurance coverage through an insurance marketplace. However, this leaves individuals with the lowest incomes with no federal financial support to purchase insurance if they fail to meet the work requirements and subsequently lose their Medicaid coverage.

Second, disenrollment for noncompliance with work requirements poses risks to public health in the United States. These risks are borne out of the experiences of Arkansas, the only state that has implemented work requirements so far. Through the first seven months of operation, more than 18 000 Medicaid enrollees have lost coverage because they failed to report their work and community engagement requirements to the state.⁶ The loss of coverage for the most vulnerable can bar individuals from receiving necessary health services, including preventive care.

Third, the implementation of work requirements and the consequence of noncompliance present states with a perverse incentive. Disenrollment for failing to adhere to work requirements incentivizes states to shift previously eligible populations off Medicaid rolls and, thus, shifts the financial costs of coverage from the state to the federal government or private insurers on the exchanges. For policymakers who oppose the increased coverage for Medicaid made available under the ACA, the shift in how waivers are being used under the Trump administration is a feature, not a “bug.” The stakes are high for Medicaid enrollees in states implementing these waivers. The Trump administration continues to signal to state policymakers that they are willing to engage in increased flexibility for their Medicaid programs.

Although the Medicaid expansion has dramatically increased eligibility for the program, the shift in how waivers are being used threatens to undermine those gains.