Adding a Work Requirement to Medicaid Could Hurt Kentucky’s Economy

In January 2018, the Centers for Medicare and Medicaid Services approved a waiver of Medicaid rules requested by the state of Kentucky. Under the HEALTH (Helping to Engage and Achieve Long-Term Health) waiver, Kentucky will require an estimated 350,000 able-bodied Medicaid beneficiaries who are not primary caregivers and/or pregnant to work, complete job training, or volunteer at least 80 hours a month in order to maintain their coverage.1 Kentucky argues that the program will increase labor force participation and makes economic sense for the state. However, analyses have shown that work requirements such as these are unlikely to lead to any meaningful increase in the number of people who work, and may actually lead to work reductions among some vulnerable populations.2

There’s an even more direct way that work requirements don’t make economic sense. According to Kentucky’s own calculations, the Medicaid waiver will reduce the flow of federal funds to the state by nearly $700 million annually by 2021, while reducing state spending, and taxes paid by state residents, much more modestly.3 That’s $700 million that won’t be paid to Kentucky doctors, nurses, hospital custodial staff, and other health care workers — which they won’t, in turn, spend on groceries, home improvements, or other goods. In addition to harming the health of those losing Medicaid coverage, this net reduction in federal funds will surely harm, not help, the state’s economy.4

Analyses by the state and outside estimators suggest that the new Medicaid work requirements will lead to about 95,000 fewer Kentuckians benefiting from Medicaid coverage over the next five years. Of these, an estimated 80,000 will be people that gained coverage through Kentucky’s Medicaid expansion under the Affordable Care Act (ACA); the remaining 15,000 will be people who were eligible prior to the ACA.

The costs of coverage under Medicaid are shared between Kentucky and the federal government. Kentucky is responsible for 28.8 percent of Medicaid spending for those eligible for coverage prior to the ACA. For those eligible for coverage under the ACA, Kentucky’s share will rise from 6 percent in 2018 to 7 percent in 2019 and to 10 percent in 2020 and beyond. For both populations, the vast majority of Medicaid costs are borne by the federal government.5

– Commonwealth Fund

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