Kentucky Sends an Ominous Signal About The Future of Medicaid

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Bac Totrong/Daily News via AP

The Trump administration recently announced that states could implement work requirements for Medicaid recipients. On January 12, Kentucky's request to introduce those work requirements, as well as other changes such as premium payments and removing retroactive coverage, was approved. Kentucky becomes the first state to tie work requirements to Medicaid coverage. Due to the approval of work requirements and other changes, nearly 100,000 Kentuckians are estimated to lose Medicaid benefits. In September, The American Prospect explored the Kentucky case and how the changes its Medicaid officials want to make will affect vulnerable Kentuckians.

While congressional Republicans may have given up on their latest attempt to repeal the Affordable Care Act, Kentucky is moving ahead with other ways to pare back Medicaid, the 50-year-old program that provides health insurance for poor and low-income Americans.

Last year, Kentucky Governor Matt Bevin submitted a waiver request to the federal Centers for Medicare and Medicaid Services (CMS) to make changes to Kentucky’s Medicaid program. The proposal, called Kentucky HEALTH (Helping to Engage and Achieve Long Term Health) “seeks to encourage employment and assist individuals as they move from dependence on public assistance to independence.” If approved, the Kentucky plan would mark the first time that people eligible for Medicaid would be subject to work requirements. It would also change Kentucky’s Medicaid program from a traditional assistance program to a “consumer-driven model,” which includes establishing specific enrollment periods, enforcing premium payments, and removing retroactive coverage.

Kentucky's waiver request is pending, but it's not the only one. With Donald Trump in the White House, Arizona, Arkansas, Indiana, Maine, Utah, and Wisconsin either have recently requested or are preparing to submit requests for federal Medicaid waivers that would permit state officials to mandate that Medicaid recipients prove they are working to receive benefits. These plans spotlight conservatives' stubborn refusal to acknowledge or understand the realities of poverty for the 69 million Americans enrolled in Medicaid.

In certain instances, Medicaid officials will waive federal regulations for specific state projects. Known as Section 1115 waivers, they permit state officials to experiment with or demonstrate new approaches and innovations that could make Medicaid better or more efficient at achieving its objective: providing health care to low-income people. These types of projects can fundamentally alter aspects of the Medicaid program at the state level without having to go through Congress.

But Republicans may be attempting to use waivers in ways that are at odds with the statute. During the Obama administration, some conservative governors attempted to impose Medicaid work requirements through Section 1115 waivers. But Obama Medicaid officials denied these requests, arguing that work requirements are inconsistent with the intent of the Medicaid program; mandating that people work, the Obama administration reasoned, could undermine Medicaid's goal of providing health care for all eligible people.

In March, Tom Price, the Health and Human Services secretary, and Seema Verma, the Centers for Medicare and Medicaid Services administrator sent a letter to state governors criticizing Medicaid expansion and detailing areas where states could develop projects to “improve” the program. One key area that they highlighted was “meritorious innovations that build on the human dignity that comes with training, employment, and independence,” a flowery and deceptive way of describing work requirements. They also suggested that states “consider creating greater alignment between Medicaid's design and benefit structure with common features of commercial health insurance,” like premiums or health savings accounts.

Meanwhile on Capitol Hill, the failed Cassidy-Graham plan, like the health-care proposals that imploded earlier this year, would have given states the option to impose Medicaid work requirements. The 2018 Health and Human Services budget also proposes that states look into implementing work requirements.

The Republicans' quest to gut Medicaid by implementing new and onerous requirements ignores how expanding the program has improved the delivery of health care in states like Kentucky.

After Democratic Governor Steve Beshear expanded Medicaid coverage in 2013, the number of uninsured people dropped from 616,000 to 223,000. Moreover, from 2013 to 2016, Kentucky saw the country’s steepest decline in the numbers of the uninsured—64 percent—or from 14.3 percent to 5.1 percent of the population—uncompensated care at hospitals dropped by 67 percent. Expansion also benefited the state economy: Kentucky health care providers received $2.9 billion and thousands of jobs were created, particularly in the health-care sector.

Newly enrolled people are accessing preventative services “at a rate equal to, and in some instances greater than, the traditional Medicaid population,” according to Kentucky's Report on Medicaid Expansion, conducted one year after expansion. People are more likely to seek care for chronic conditions like diabetes and high cholesterol. (Chronic conditions are more prevalent in the expansion population than in the traditional Medicaid population.)

Low-income people in Kentucky have been “getting healthier, and [getting] healthier faster than they are in other places,” says Dustin Pugel of the Kentucky Center for Economic Policy, which opposes the Bevin plan. “For a state that started out as a poorer, sicker state than most, it's been a huge boon,” Pugel tells the Prospect, citing health research on how Kentucky’s expansion benefited the low-income population.

But Kentucky HEALTH seeks to blunt these positive effects, in order to “reduce dependency” on government. The state's plan to “teach recipients to be consumers of healthcare,” is largely informed by patronizing assumptions about poor people.

Bevin modeled his plan on an Indiana Medicaid waiver proposed and partially approved in 2015 under then-Governor Mike Pence. Unlike traditional Medicaid programs, the Healthy Indiana Plan 2.0 program includes complex components, such as personal health savings accounts and premium payments for some participants. Pence tried to implement work requirements, but Obama administration officials denied the request. (Indiana resubmitted a request to implement work requirements in July. Verma, the CMS administrator, helped develop Medicaid waiver plans in both Indiana and Kentucky as a consultant prior to being selected to lead the agency. She has recused herself from evaluating these proposals.)

Kentucky's proposal stipulates that in order to receive Medicaid, participants who are of “working age” and do not have documented disabilities must work at least 20 hours per week. This provision is similar to how benefits are distributed under the Temporary Assistance to Needy Families program (TANF). Yet, according to a Kaiser Family Foundation report, work requirements have little impact on whether a low-income person has a job. The report found that TANF requirements could be responsible for an initial increase in employment; but, after five years, those who weren’t required to work were just as likely to be working as those who were subject to work requirements. This finding corresponds with other surveys that have found that poor people largely prefer work over government assistance or help from their families.

What many conservatives fail to realize is that most Medicaid recipients are already working. Of the 24 million non-disabled adults that received Medicaid in 2015, 59 percent were working themselves, and 88 percent lived in a family with at least one worker.

One central reason many working people receive Medicaid is because their low-wage employers do not provide health care benefits. In Kentucky, workers gained coverage in the food service, construction, and retail sectors—the state’s largest and typically ones that

do not offer employer-sponsored health insurance coverage. Of the people in the Kentucky Medicaid program who do not work, most are taking care of a loved one, are in school, or are mentally or physically ill.

In June, Jessica Greene, a professor at Baruch College's Marxe School of Public and International Affairs, conducted a series of focus groups with current and former Kentucky Medicaid recipients to gauge their thoughts and perspectives on the proposed changes, which she wrote about for the Health Affairs blog. “I was struck by how hard everybody was struggling and how heartfelt their difficult circumstances were,” Greene tells the Prospect. “These were not people who were out to work the system, these were people who are struggling, and struggling in several different ways.” But overall, Greene says the focus group participants felt that the people making these policies “have no idea what their lives are like.”

Bevin justifies his proposal for work requirements by arguing that “[m]eaningful work and participating as a contributing member of society is recognized as part of a healthy lifestyle.” There is classism inherent in implying that poor people on Medicaid are not already “contributing members of society”—and this view reduces much of the data and daily realities about life in poverty to the simple conclusion that if poor people want good health, they should get a job.

But it's difficult for low-income people to find employment due to the vicious circle of poverty, which may include limited formal education; limited employable skills; limited English-language skills; inadequate access to transportation; inadequate access to affordable childcare; and undiagnosed mental and physical illnesses. One focus group participant, who was experiencing homelessness, said, “I ain't got no problem with workin'. Once I get the job, transportation becomes a problem. Then, feeding myself becomes a problem before I get the check. Then [hygiene] becomes a problem—I can't get into the shelter because the time I come back off of work coming out there, everybody got the beds and whatnot.”

But there aren't enough jobs in Kentucky for everyone who wants to work.

Some counties have extremely high unemployment rates. In August, many unemployment rates in the eastern region of the state exceeded 10 percent. Magoffin County had an unemployment rate of 15.4 percent—the highest in the state. And, many of these jobs in the coal, manufacturing, and steel industries aren’t coming back: The last coal mine in Magoffin closed in 2015. The Kentucky HEALTH proposal does not take the lack of employment opportunities into account.

Community service is another option that people can use to meet the work requirement under the plan. However, volunteering is unlikely to be a viable option for most. There are few volunteer positions that offer 20 hours of stable and continuous work each week. In a letter to Bevin, the Kentucky Nonprofit Network summarized comments they received from nonprofit representatives: Training and supervising the few volunteer positions available is time consuming, and many organizations simply can’t handle an influx of new volunteers. The proposal also mentions that job training can fulfill the requirement, but does not offer a plan to ensure that Medicaid recipients will be guaranteed a placement.

Though the work requirements are described as the “cornerstone” of the plan, it also will “expose members to the cost of healthcare and [encourage] them to act as consumers of healthcare by evaluating cost and quality” that is, teach them about the realities of a consumer-driven system by including premiums, health savings accounts, and health incentives.

As one participant in one of Greene's focus groups said, “The rationale is like assuming that poor people are dumb, or poor people don't have experience paying bills. They do. They probably do it better than people with a lot of money, because they know how to juggle this and juggle that, and stretch that dollar.”

Kentucky deems premiums required under the plan “affordable.” But affordable for whom? “The most anyone would have to pay, in terms of a Medicaid premium, is $15 a month, certainly much less than the cost of a cell phone or cable TV, which most people have,” Jim Waters, president of the right-leaning Kentucky-based Bluegrass Institute told the Heartland Institute, a conservative think tank in Illinois. However, after two years, premiums increase $7.50 each year for those between 100 and 138 percent of the poverty line, reaching $37.50 per month in the fifth year of participation—that’s $450 each year.

Medicaid premiums in other states have negatively affected enrollment. In Indiana, approximately one in three eligible individuals who apply do not make their first premium payment and as a result are not even enrolled. Premiums in Oregon helped contribute to a 77 percent drop in enrollment from 2003 to 2005.

Additionally, as an incentive, all Kentucky HEALTH members will have access to a “My Rewards Account.” They will receive reward dollars for completing certain “incentive activities” like attending a smoking cessation class and lose reward dollars when they do something “inappropriate,” like go to the emergency room for something later deemed a non-emergency. (Low-income people will be discouraged from to going to the hospital when they need to, even though Medicaid recipients and those receiving private insurance use the emergency room for non-emergencies at similar rates.)

With their rewards account money, participants can purchase “an array of enhanced benefits” like vision and dental care—both which are currently provided under Kentucky's existing Medicaid program. Moreover, those who leave Medicaid and “maintain stable employment and remain commercially insured without Medicaid for 18 months” can apply to receive the remaining balance of their rewards account—a policy that further discourages Medicaid recipients from seeking the care they need.

In Greene's focus groups, many participants expressed frustration with the rewards account concept. “There was an implicit assumption [by the Bevin administration] that they needed these incentives,” Greene explains. She added that many of the people she talked to were already working, or already practicing the healthy habits. So they wondered how they would fund their vision and dental care.

A plan based on work requirements and costly premiums is likely to run into serious issues. The thousands of people who offered public comments have warned that the state is heading down the wrong road. Indiana, which instituted a similar roster of requirements, has had many serious problems.

Ultimately, Kentucky HEALTH is designed to save the state money, not to improve health outcomes for poor and low-income people. State Medicaid officials argue that the plan is “designed to stabilize the program financially,” even though it will cost state officials $1.9 billion in federal funds to cut $331 million in state spending. The savings stem from fewer enrolled participants—an estimated 95,000 people will be booted off the program by 2021—and not all of these participants will get full-time jobs that come with health insurance benefits.

The Kentucky proposal also defends and promotes a specific narrative. Its stipulations and components are built on the assumption that Medicaid discourages work and allows beneficiaries to be dependent on the government. Though there is a stated goal of “encouraging employment,” it is mainly designed to suppress Medicaid enrollment and reduce the size of government.

If Trump officials approve Kentucky's work requirement plan—and there are indications that they may do just that—there’s likely to be a domino effect in other conservative states. These cruel policy changes will ultimately put the newly uninsured people at greater risk for illness and disease.