Tangled Up in Side Effects

Why work requirements for health care is bad medicine for everyone
 

simon haeder is a political scientist at the John D. Rockefeller IV School of Policy and Politics at West Virginia University.

Illustrations by PJ Loughran

Published April 26, 2019

 

It’s a no-brainer: those who take from society should give back if they possibly can. Or maybe not.

Insisting that people receiving health insurance at government expense through Medicaid should work has undeniable appeal. Accordingly, many Republicans (and some Democrats) are pushing to give states the discretion to impose work or study requirements on all Medicaid recipients who can push a broom or crack a textbook.

But a close look at the practicalities suggests that, in many cases, neither taxpayers nor the beneficiaries of government assistance are likely to come out ahead. It’s time to call off the evidence-free debate on Medicaid work requirements and start figuring out how to reconcile America’s moral obligation to assist the poor with Americans’ deeply held belief in individual responsibility.

The Path Toward Medicaid Work Requirements

By the standards of European social democracies, America was late to the game of government welfare. Until the post-World War II era, those in poverty found it challenging, if not impossible, to procure public assistance. When available, it was mostly furnished by state and local governments, and generally only in response to natural disasters or major economic upheaval. Among the few consistent sources of aid were public hospitals, which for most of their existence served as little more than warehouses for the destitute. What’s more, the inmates were generally expected to earn their keep — say, by cleaning buildings or growing potatoes for the kitchen.

The federal government substantively entered the field only in response to the overwhelming hardship caused by the Great Depression. After stemming the most immediate needs of bankrupt states and localities, Washington became an employer of last resort for adults through programs like the Works Progress Administration and the Civilian Conservation Corps. However, backlash from the private sector pushed the federal government out of direct employment within a few years. That is when Uncle Sam morphed into the provider of financial assistance to low-income families.

Strikingly, as Washington expanded the very basic safety net, it did not include the requirement of employment to qualify for benefits. In fact, it fought back efforts by states and localities to require beneficiaries to work, albeit not always successfully. And across the decades, states have continued to push for greater flexibility in program design, including work requirements — particularly as the quid pro quo for direct cash assistance, a k a “welfare.”

 
With the movement to the right in national politics in recent years, imposing work requirements has become the fix du jour for all that ails the safety net.
 

Ironically, proponents of work requirements got their big break with a liberal Democrat in the White House. The technocrat-friendly Clinton administration broadly encouraged experimental programs on the theory (sometimes validated) that states could be the laboratories of policy innovation. And with the movement to the right in national politics in recent years, imposing work requirements has become the fix du jour for all that ails the safety net.

In their quest to push work requirements, proponents have relied on four arguments. First, they say that public programs should encourage a “culture of work,” instead of a “culture of dependency.” This argument carries a lot of weight in the United States, as opposed to in Europe where a decent living standard is seen as a right rather than a reward for virtuous behavior. And while enthusiasm for work as being good for all is sometimes colored by racial undertones (they are poor because they’re lazy), surveys suggest that it broadly resonates with the public.

Second, proponents of work requirements emphasize the practical problem of the limited availability of government funds — and the implication that making it more difficult to qualify for benefits will save money by winnowing out malingerers. This reasoning gained fans during the Great Recession, when states and localities were forced to cut outlays. And it has lingered even after the economy lumbered back to full employment.

Third comes a technocratic argument. Those favoring work requirements point out that the design of many social programs, in which even small increases in earnings can trigger large reductions in benefits, creates strong disincentives to work. Hence, work requirements can be useful in offsetting an unintended downside to public generosity.

Finally, proponents argue that public programs should help beneficiaries escape poverty in the long run — that is, that they should serve as a “hand up” and not as a “hand out.” Without work (and/or training) requirements, the argument goes, beneficiaries are unlikely to gain the skills or experience to become self-sustaining.

Whatever one thinks of the merits of these arguments, there is no question that proponents have been successful in framing the policy issue in ways that dilute the concern that the requirement is punitive. And they have made considerable headway in introducing work requirements into programs that buttress the safety net. With SNAP, the Supplemental Nutrition Assistance Program (a k a food stamps), states may now choose to make employment or training mandatory. And while there are no general work requirements currently imposed on those receiving Section 8 vouchers (a k a federal rent subsidies), some local housing authorities have acted unilaterally in this regard.

But the greatest success has been with Temporary Assistance for Needy Families (TANF), the successor to the venerable and often-maligned Aid to Families with Dependent Children. The Personal Responsibility and Work Opportunity Act (a k a welfare reform), which was passed with bipartisan support and signed into law by President Clinton in 1996, drastically transformed the nation’s premier cash assistance program by imposing strict work requirements and time limits on access to benefits.

The nation has since had a significant decline in the welfare caseload. TANF now reaches 23 percent of families living below the official poverty line, as opposed to 68 percent when the reform was enacted. Not surprisingly, proponents of work requirements have hailed this result as proof that tough love works to reduce dependence. But a closer analysis suggests a less attractive conclusion.

What Tanf Really Tells Us

Start with the confounding fact that a variety of other forces were working to reduce welfare caseloads in the wake of TANF. The strengthening “Goldilocks economy” of the late 1990s helped, as did the expansion of the Earned Income Tax Credit, which used a carrot rather than a stick to encourage work. On the grim side, it seems that large numbers of eligible individuals have given up, choosing not to apply for aid in the first place. Indeed, the percentage of eligible individuals enrolled in the program was cut in half (to about 40 percent) from 1994 to 2009.

 
Medicaid’s federal administrators claim work requirements “incentivize beneficiaries to engage in their own health care” — a position that flies in the face of most research on the issue.
 

In some cases, states established short-term support programs that diverted eligible participants — or, troublingly, that made the TANF program design deliberately punitive. Beneficiaries have also been shown to stay on the program for shorter periods. In any event, the direct impact of the work requirement must have been modest since the percentage of TANF beneficiaries who work has grown very little. Moreover, there is ample evidence that states have become astute in locating and exploiting a number of loopholes in the legislation that allow them to declare victory over need and reallocate TANF funds to unrelated activities — notably, to filling gaps in their budgets.

When it comes to the experience of the beneficiaries, more causes for concern emerge. Work requirements may not only fail in their primary mission — helping to lift households out of poverty — but the long-term impact may actually be perverse. While it has become conventional wisdom that welfare reform has been a success, long-term studies suggest that employment and income gains have been ephemeral.

Individuals subject to work requirements initially found entry-level jobs, but rarely managed to translate this foothold into better jobs down the road. Importantly, few of them have jobs that include medical or retirement benefits. Moreover, they are likely to be the first ones fired and the last ones rehired in an economic downturn.

One other point in this regard: post-reform, there has been a parallel decline in participation in other assistance programs, suggesting that receiving cash assistance made it more likely that poor people would be informed about (and take advantage of) other forms of assistance, such as SNAP and Section 8 housing subsidies, to which they were legally entitled.

The work requirement has proved especially problematic for those with significant employment barriers such as chronic health conditions, blank work resumes and few marketable skills. Minorities appear to also be disproportionately affected, as do those suffering from addiction or domestic violence as well as parents who are reluctant to leave home if they lack access to adequate child care.

The Slippery Slope

If TANF is subject to work requirements, why not go after a much bigger fish? Why not, indeed. The case for attaching work requirements to the $600 billion Medicaid program has been championed by a host of Republican-led state governments, including those in Kentucky, Arkansas, Wisconsin, Indiana and New Hampshire. To give them a boost, the Trump administration asserts it has found a way to circumvent what had been a long-held bipartisan Congressional consensus to prevent a move in this direction.

The president’s men (and women) have sought “1115 demonstration waivers,” which allow states to temporarily omit requirements of the Medicaid statute in order to test new, hopefully improved, approaches to coverage. Medicaid’s federal administrators now claim that work requirements will “incentivize beneficiaries to engage in their own health care and achieve better health outcomes and ... facilitate smoother beneficiary transition to commercial coverage” — a position, alas, that flies in the face of most research on the issue.

Legal hurdles clearly remain. Medicaid’s regulators have acknowledged that statutory changes may be necessary to secure work requirements’ legal footing. And enabling legislation isn’t likely, now that the House is controlled by the Democrats.

To date, only two states have moved to carry out work requirements for the program. In Kentucky, the conservative Bevin administration gained approval for a requirement that Medicaid beneficiaries work or fulfill certain “community engagement” requirements for at least 80 hours a month. Those under 19 or over 65 will be exempt, as will pregnant women, the medically frail, primary caregivers and recipients of disability benefits. Kentucky estimates the rules would nonetheless eliminate 100,000 beneficiaries from the Medicaid rolls. Currently, Kentucky’s use of the waiver has been blocked by federal courts over concerns about its legality.

In Arkansas, the only state with a fully created work requirement in place, particular concerns have been raised over what appears to be a deliberate attempt to reduce enrollment by establishing daunting administrative hurdles for beneficiaries. These include requiring beneficiaries to document compliance via an online portal — which is offline for a significant number of hours each day in a state that ranks at the bottom nationwide in terms of access to the internet. And indeed, early experience confirms that the work requirement is a blunt instrument that is being used to deny coverage to thousands.

Those Devilish Details

Experience with programs other than Medicaid, along with early Medicaid-related evidence from Kentucky and Arkansas, highlights the policy design and implementation challenges inherent in work requirements. Even if one accepts the idea that work requirements could play a role in integrating the poor into the labor market, caution in program design should be the watchword.

The first crucial question is who will be subject to the requirement. Using the tough criteria the Social Security Administration employs to determine eligibility for Supplemental Security Income — that is, welfare for the disabled — may inadvertently push many people off Medicaid who are barely able to work.

There is also no general agreement whether specific groups — people a few years too young for Social Security pensions, for example, or students or pregnant women or the mentally ill — should make the cut. Handling requests for temporary exemptions would be particularly challenging, with large potential for denying coverage to the truly needy.

Then there’s the issue of illicit drug use. Wisconsin was seeking permission to screen applicants for substance abuse. But would drug test failure be the end of the story? States would need to decide how to proceed on a test failure — that is, whether to provide treatment or simply deny coverage (and for how long).

Finally, states must consider whether to grant exemptions to economically depressed localities where job prospects for the marginally employable are especially bleak. Well, not quite finally: There is the issue of natural catastrophes. Would work requirements be waived for residents of places battered by hurricanes, floods, fires and the like?

Once the issue of covered populations and exemptions is addressed, states would still need to decide what constituted work (or acceptable initiatives). Do job search, job training, volunteering and school all qualify? States with current waiver requests are all over the place on this one.

 
Tough criteria the Social Security Administration employs to determine eligibility for Supplemental Security Income may push people off Medicaid who are barely able to work.
 

The farther you drill down, the more important the details appear. What’s the minimum number of work hours? What about cyclical employment in sectors like construction, where seasonal layoffs are routine? How long does a benefit recipient have to replace a lost job? And how many “second chances” do applicants have before losing access to Medicaid permanently?

Kansas, by the way, has added another wrinkle. It wanted to limit total lifetime access to Medicaid in a manner similar to the current federal lifetime restrictions under TANF. Whatever Medicaid administrators say, the courts may say differently.

More Devilish Details

The challenges do not end with policy design. Work requirements are problematic to administer because they require a significant investment in information technology and personnel — something many states are unwilling or unable to undertake. In many cases, states would need to contract with IT vendors to make necessary upgrades.

More generally, building and running a system for managing work requirements for tens of thousands won’t come cheap. Kentucky, for example, expects to spend $121 million by 2020 on administration and $163 million by 2021. Fitch Ratings, which tracks state finances as part of the job of scoring their credit, expects Kentucky’s Medicaid administrative costs to escalate by 40 percent. Perhaps it isn’t surprising, then, that some states pressing for work requirement waivers are simply ignoring the question of administration on their waiver applications.

At least some states have a fair idea of what they would need to do to get work requirements for Medicaid up and running. Not so the potential beneficiaries. Even individuals who fulfill the requirements for safety net programs where work is already part of the deal often find themselves losing benefits because they don’t know what exactly is expected of them or how to navigate the relevant bureaucracies for help. Worse, they often lack computers (and computer skills) and internet access to find and fill out online forms — or they can’t afford the time and money needed to petition the relevant bureaucrats in person.

One journey through the maze, incidentally, is rarely enough. Work requirements, as well as other administrative burdens like recertification demands, often trigger a process referred to as “churning” — disenrollment from a program that requires a reapplication. Studies of health-specific public assistance point to large and sustained reductions in enrollment in the wake of adding to administrative requirements.

Whether the purpose of work requirements is to save taxpayer money, punish malingerers or increase beneficiaries’ economic mobility, children are often collateral damage. More time spent working (or filling out forms) is likely to mean less time spent with offspring or devoted to prenatal care. Studies indicate that work requirements in TANF led to increased risk of low birth weight, a reduction in breastfeeding and increases in the number of children entering foster care.

Perhaps the most likely groups to be undone by the bureaucratic maze are those suffering from mental illness or substance abuse. They may, in fact, be exempt from work requirements, but lack the capacity to prove it. More generally, protecting those in ill health or disability can be a formidable challenge. Fully 70 percent of people with incomes below 200 percent of the federal poverty level report only fair to poor health or having one or more chronic medical conditions. This percentage, by the way, climbs to 83 percent for those over 55.

Thinking Bigger

Given the complex nature of U.S. health care, work requirements for Medicaid carry the potential for unintended adverse consequences. For starters, consider the cornerstone role of Medicaid in health care at the state level.

While the expansion of Medicaid under the Affordable Care Act has significantly reduced uncollectible bills and charity expenses for all hospitals, rural hospitals have particularly benefited. And not a minute too soon, since the latter are under tremendous financial strain created by the changing demographics of rural America. Many hospitals have been forced to close, a problem especially apparent in states that chose not to expand Medicaid. Similarly, Federally Qualified Health Centers — community umbrellas for care to low-income households — overwhelmingly rely on Medicaid reimbursement to survive. Thus, coverage losses due to work requirements could prove devastating for these essential (and already ailing) providers.

Making Lemonade

The current push for work requirements in Medicaid should be viewed in conjunction with the broader political environment that is hostile to public assistance programs in general. Republicans at the national level have moved decisively to curtail safety net programs. The Medicaid program continues to be confronted with a severe financial threat in the form of the undoing of the Medicaid expansion, as well as the elimination of the program’s status as an income-based entitlement.

 
The goal of pushing people out of dependence is laudable and popular. But it doesn’t follow that taking away medical coverage from those who can’t afford to buy it would advance the goal.
 

Conservatives are eager to shift toward per capita limits on spending or block grants that leave it to the states to decide how broad and how generous the programs will be. Litigation further threatens crucial components of the Affordable Care Act that dovetail with Medicaid. Even mom-and-apple-pie programs like the Children’s Health Insurance Program face threats.

Should any of these efforts be successful, states would be confronted with destabilizing changes to their health care systems. Adding work requirements would gild the poisonous lily.

The goal of pushing people out of dependence is laudable and popular. But it doesn’t follow that taking away medical coverage from those who can’t afford to buy it would advance the goal. Indeed, imposing work requirements would be bound to deny insurance to many who could not possibly benefit from another dose of tough love.

Moreover, this may prove to be a battle that both sides lose. The states promoting work requirements are likely to be subject to costly court challenges and extended periods of uncertainty about their budget obligations. And if promoters of the requirement prevail, it will be up to local economies to create employment opportunities for thousands of marginally employable workers.

All that said, I think there is an opportunity here for constructive compromise. For their part, Democrats need to acknowledge that financially pressed middle-income Americans resent public assistance in part because it asks for little in return from beneficiaries. What’s more, some beneficiaries really would gain from being coaxed into work in well-designed programs, as would society as a whole.

However, the emphasis should be on “well-designed,” meaning programs that are tuned to the capacities of beneficiaries and create a plausible path to reduced dependence. Such programs, by the way, are unlikely to save money in the short run. In return, Republicans need to end their effort to prevent the expansion of coverage through Medicaid.

Such a grand bargain would unquestionably be hard to come by in a political environment so divided by ideology and tribalism. And maybe it is beyond reach. But the demand for bipartisan effective government may yet trickle up, changing the political calculus even for elected officials who are convinced that politics is a zero-sum game. We should be ready for the opportunity if it surfaces.

main topic: Social Safety Net
related topics: Health