We hope you enjoyed the holidays and New Year and are getting back into the swing of work. Speaking of work: Medicaid. We have previously covered on this blog (here) the Trump Administration’s growing departure from the Obama Administration with respect to the Medicaid program, but now the departure has become increasingly palpable. On January 11, 2018, CMS announced a new policy supporting states seeking to adopt work and community engagement requirements (together hereinafter referred to as “work requirement”) as part of their Medicaid programs through section 1115 waivers. Then, today, it approved Kentucky’s 1115 waiver containing a work requirement that will become effective in July of this year. This is the first time that CMS has approved a work requirement in the program’s 50-year old history.
As many of our readers know, Medicaid has traditionally been a government health insurance program that is, by and large, reserved for the poor. Prior to the Affordable Care Act’s (ACA) Medicaid expansion, individuals seeking to qualify for Medicaid generally needed to demonstrate that they fell within a category of eligibility (children, pregnant women, adults in families with dependent children, disabled, and elderly) and were also poor.
The ACA expanded eligibility for Medicaid by dispensing with the “categorical” requirement and permitting able-bodied adults to enroll in Medicaid as long as their income was below 138% of the federal poverty level (FPL). Since the Supreme Court ruled that the ACA’s Medicaid expansion had to be affirmatively opted-into by states, 33 states (including DC) have expanded Medicaid.
However, a requirement that Medicaid beneficiaries be required to “work” or participate in “community engagement” has never been a requirement for eligibility or continued participation in the program. Following the ACA’s Medicaid expansion though, many Republicans began to see a work requirement as a way to tame “a health care entitlement they regard[ed] excessively cost and riddled with fraud and abuse.” The Obama Administration consistently denied state efforts at introducing such requirements, citing in its denial letter to New Hampshire’s request that a work requirement, among other proposals, “undermine access, efficiency, and quality of care provided to Medicaid beneficiaries and do not support the objectives of the Medicaid program.”
Thus far, 10 states have submitted waivers to CMS that contain a work requirement: Kentucky, Arkansas, Wisconsin, Utah, Mississippi, Kansas, Arizona, Maine, New Hampshire and Indiana. Kentucky’s waiver request is the first one to be approved. We briefly summarized Kentucky’s waiver here.
THE STATE MEDICAID DIRECTORS LETTER
CMS announced its dramatic change in policy through a State Medicaid Directors Letter (SMDL), which is a form of sub-regulatory guidance through which CMS provides guidance to state Medicaid programs on the agency’s policy direction and interpretations of federal law. According to the opening paragraph of the SMDL, “CMS will support state efforts to test incentives that make participation in work or other community engagement a requirement for continued Medicaid eligibility or coverage for certain adult Medicaid beneficiaries in demonstration projects….” CMS expects such programs to be designed to “promote better mental, physical, and emotional health in furtherance of Medicaid program objectives.” But CMS also notes that such programs may also be designed to “help individuals and families rise out of poverty and attain independence….”
Legal and Policy Justification
Based on the SMDL, the legal authority CMS appears to rely on for justifying its support of Medicaid work requirements is § 1901 of the Social Security Act (the Act). This provision authorizes annual appropriations for state Medicaid programs that furnish:
“(1) medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care….” (emphasis added).
In separately issued FAQs, CMS confirms that it is heavily relying on the second prong of § 1901 by closely tracking the language of the statute. The agency states “We believe that programs that incentivize community engagement have the potential to further Medicaid objectives to the extent they are designed to promote better mental, physical, and emotional health, and, separately, help individuals and families rise out of poverty and attain independence.”
CMS also states that it recognizes a “broad range of social, economic, and behavioral factors can have a major impact on an individual’s health and wellness….” The agency uses the term “determinants of health” throughout the SMDL to collectively describe these factors, along with identifying various academic analyses that have suggested targeting certain health determinants can improve health outcomes. For example, CMS notes that studies have shown education can lead to improved health outcomes, higher earnings are positively correlated with longer lifespans, and that unemployment generally produces higher mortality, poorer general health, and higher medical consultation and hospital admission rates. According to CMS, this body of evidence supports its view that work requirements can in fact “help individuals and families rise out of poverty and attain independence.”
State Flexibility In Program Design
Although the SMDL clarifies that each work requirement proposal will be analyzed on its own merits, CMS highlights key areas for states to consider as they seek to adopt work requirements.
Alignment with Other Programs. CMS states its support of states’ efforts to align the work requirements of welfare programs such as Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Programs (SNAP). This includes aligning, among other things:
- Exceptions for the same populations
- Protections and supports to individuals unable to meet the work requirement
- Allowable community engagement activities and required hours of participation
- Changes to requirements or allowable activities because of economic or environmental factors
- Enrollee reporting requirements
- Availability of work support programs
CMS clarifies, however, that federal matching funds will be limited only to “allowable activities directly linked to Medicaid beneficiaries,” which may or may not include additional information technology system enhancements for integrating requirements across programs. States would also be required to consider compliance with TANF or SNAP work requirements as automatic compliance with Medicaid work requirements, and states should be able to describe a framework to communicate to beneficiaries differences in program requirements in the event that beneficiaries transition from TANF or SNAP but remain subject to Medicaid work requirements.
Populations Subject to Work Promotion/Community Engagement Requirements. CMS states that states should clearly identify the eligibility groups subject to a work requirement, which may not include pregnant women and children, the aged, or the disabled. Additionally, CMS clarifies that to the extent an individual is considered “disabled” by other federal civil rights laws, states must have mechanisms in place to ensure reasonable modifications are provided to people who need them, including possible exemptions. States must also create exemptions for individuals it determines to be “medically frail” and should exempt individuals with “acute medical conditions” that are validated by a medical professional and would prevent them from complying with a work requirement. Moreover, CMS notes that individuals addicted to opioids or other substance use disorders may also be protected by disability laws, and thus states must take steps to provide reasonable accommodations for these individuals.
Range of Community Engagement Activities. In addition to the “community engagement” activities of TANF and SNAP, CMS encourages states to consider other strategies to assist individuals in satisfying work requirements, such as job training, child care assistance, transportation, etc. At the same time though, CMS states that Medicaid funding would not be provided to states to finance these services for individuals.
Transparency. Section 1115 waivers containing work requirements would be subject to the same public notice and transparency requirements as any other waiver.
Budget Neutrality. Section1 115 waivers containing work requirements would also have to be budget neutral, consistent with current policy. CMS also notes that states would not be permitted to accrue savings from a reduction in enrollment that may occur as a result of adopting a work requirement.
Monitoring and Evaluation. States would be required to submit to CMS a draft of proposed metrics for quarterly and annual monitoring reports. Among the information states would be required to document are key challenges, underlying causes of those challenges, and strategies of addressing those challenges, as well as key achievements and the conditions and efforts that led to those particular successes.
States will also be required to evaluate health and other outcomes of individuals that have been enrolled in a demonstration containing a work requirement. Evaluations must be independent and designed to determine whether the demonstration is meeting its objectives i.e. improved health, well-being, and independence.
IMPLICATIONS FOR STAKEHOLDERS
Legal Challenges. We anticipate that CMS’ change in policy will likely produce litigation, but as we have covered on this blog before (here), the Medicaid program’s lack of an enforcement mechanism poses unique challenges for any plaintiffs willing to mount a legal challenge. As a threshold matter, who would a plaintiff sue? CMS? The SMDL is a subregulatory guidance document that, by itself, does not have the force and effect of law. Plaintiffs would have an uphill battle trying to persuade a court that the SMDL, by itself, is ripe for judicial review.
CMS recent approval of Kentucky’s waiver proposal may have sufficiently ripened the case though. But what would the argument be? That Kentucky pursued a waiver contrary to the objectives of the Medicaid program? Likely not. More likely would be the argument that CMS approved a waiver contrary to the Medicaid program, which would raise issues of statutory construction and possibly the reasonableness of CMS’ interpretation. Apart from determining whether a work requirement is consistent with the “objectives of the Medicaid program” is also the question of whether approving a new requirement is the same as “waiving” an existing requirement. CMS has authority to waive an existing requirement under its 1115 authority, but a work requirement seems to be “adding” something new. In short, only time will tell how well CMS’ policy change holds up under legal scrutiny.
Medical Frailty and Acute Conditions. CMS’ position that states are required to exempt “medically frail” individuals and individuals with “acute medical conditions” does not provide clear guidance on what this criteria entails. What is clear is that CMS believes states should make this determination and that a medical professional must validate each case. Given the discretion available to states in establishing criteria for qualifying as “medically frail” or possessing an “acute medical condition” that prevents compliance with a work requirement, stakeholders should be prepared to work with state Medicaid programs on ensuring that appropriate medical conditions are included. This will be particularly important for rare disease patient groups and manufacturers that rely on Medicaid for coverage and payment.
Design of Work Requirements. In the SMDL, CMS noted that eligibility for Medicaid benefits may not be the only provisions affected by a work requirement. Some states have also suggested imposing a work requirement as a condition of receiving additional or enhanced benefits, or as a condition of paying reduced premiums or cost-sharing. In other words, even if a state adopts a conceptually simple work requirement (i.e. demonstrated participation in qualifying activities), the practical effect on an individual’s Medicaid benefits could differ across states. Therefore, stakeholders will need to be aware of not only which states implement a work requirement, but how the work requirement will change the dynamics of a state’s Medicaid benefits.
Beneficiary Supports. Although CMS encouraged states to develop ways to support Medicaid beneficiaries in their work and community engagement efforts, the agency clarified that Medicaid funding would not be provided for the states’ initiatives. As a result, states may have financial difficulties in developing and implementing beneficiary support systems. Stakeholders should view this as an opportunity to fill the gap through innovative care delivery and payment models.