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Urban Institute

Rationale for Medicaid work requirements is not supported by evidence

On Monday, lawmakers added an amendment to the American Health Care Act (AHCA)-the House health care bill that aims to repeal and replace the Affordable Care Act (ACA)-that would allow states to impose work requirements for Medicaid eligibility among low-income working-age adults. The amendment seeks to keep more healthy adults in the workforce and off Medicaid, but no evidence supports this policy’s effectiveness.

Under the Obama administration, states were denied requests for similar Medicaid work requirements, but a recent waiver application from Kentucky to impose work requirements for its Medicaid expansion may find a more receptive audience in the Trump administration.

In a recent open letter to governors, US Department of Health and Human Services secretary Tom Price and Centers for Medicare and Medicaid Services administrator Seema Verma said that state applications for Medicaid demonstration waivers will be reviewed and approved for innovations "that build on the human dignity that comes with training, employment, and independence."

American Health Care Act 2017
House Speaker Paul Ryan stands with Energy and COmmerce Committee CHairman Greg walden, R-Ore., right, and House Majority Whip Kevin Mc Carthy, R-Calif., Left, speaking during a news conference on the American Health Care Act on Capitol Hill in washington, Tuesday, March 7, 2017. Photo by Susan walsh/AP.


Some AHCA proponents believe the ACA Medicaid expansions encouraged "able-bodied" adults to voluntarily withdraw from the labor force. They argue that work requirements would remove such people from the Medicaid program and result in government savings. These beliefs may stem in part from the Congressional Budget Office’s 2014 projection of negative impacts of the ACA on employment. Now, more than three years after the ACA Medicaid expansions went into effect in some states, we have data that allow us to examine whether, on average, enrollees reduced their work effort.

States opting for the ACA Medicaid expansion experienced immediate increases in Medicaid coverage and millions of low-income childless adults, parents, and older near-Medicare-eligible adults gaining coverage.

The expansions have also been linked to increased access to care: low-income childless adults were more likely to have a primary care physician and less like to delay needed medical care because of cost. The expansions do not appear to have come with any meaningful reductions in private insurance coverage.


What we know about the labor supply and ACA Medicaid expansion
A policy change of this magnitude provides a natural experiment to examine whether expanded Medicaid coverage has a relationship to reduced workforce participation among low-income adults. No evidence suggests that Medicaid expansion had any impact on labor market outcomes.

Trends in employment status, number of hours worked per week, full-time work status, wages, and job switching were no different across Medicaid expansion and nonexpansion states following implementation. Moreover, a recent Urban Institute study found no association between the major provisions in the ACA and employment status or hours worked per week.

A closer look at the trends among older low-income adults who are near Medicare eligible is instructive because before Medicaid expansion, some older low-income adults may have worked solely to retain employer-sponsored health insurance and may have been waiting to reach Medicare eligibility at age 65 to retire (a phenomenon known as "employment-lock"). But researchers found that among adults nearly eligible for Medicare (ages 55 to 64), the ACA Medicaid expansions had no measurable effect on the decision to retire.

Most of the newly eligible Medicaid population in 2016 lived in a household already attached to the workforce: 59 percent of adults are working and 79 percent of adults are in families with at least one worker. Moreover, among nonworking, non–Supplementary Security Income (SSI) disabled adults receiving ACA Medicaid coverage, more than a third report illness or disability and more than a quarter identify taking care of home or family as key factors that prevent them from working.

As a result, work requirements for Medicaid will not affect eligibility for most current beneficiaries, but will risk limiting health care access from those who may need it most (e.g., caretakers, disabled or ill and not receiving SSI). By mandating work from this population, uninsured rates among a vulnerable population would increase.

The ACA Medicaid expansions have had a positive impact on health insurance coverage for young and old parents and childless adults. In addition, evidence demonstrates that across all demographic subgroups affected by the ACA, the Medicaid expansions had no impact on labor market outcomes. No evidence suggests that people decreased work effort to satisfy income rules and gain Medicaid eligibility under the ACA.

Given that most low-income adult Medicaid beneficiaries who are not working identify illness or caretaking responsibilities as the reasons they are not working, introducing work requirements for Medicaid may increase uninsured rates or require people to prioritize work over health and family.

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