Medicaid work requirements could hurt hospital finances, though how a state's payer mix and how it designs the regulation will influence the subsequent financial impact for providers, according to a new report from The Commonwealth Fund.
Work requirements lead to fewer covered Medicaid beneficiaries. That results in hospitals with reduced revenues, more uncompensated care and smaller operating margins. Kentucky, as well as Michigan and Tennessee, which have proposed requirements, could lose more than 20% of Medicaid revenue per hospital. Kentucky and Michigan would also see huge uncompensated care cost increases, according to the report.
Meanwhile, this week Trump administration officials are arguing in defense of the work requirements in front a skeptical federal judge in Washington, D.C. Judge James Boasberg already halted the requirement in Kentucky after finding it may violate the very purpose of the program, according to his initial ruling in June. The administration "never adequately considered" whether the program would "help the state furnish medical assistance to its citizens, a central objective of Medicaid," the ruling said. Boasberg will have a final ruling in the case in two weeks, a lawyer present in the courtroom during Thursday's oral arguments told Healthcare Dive.
Despite much discussion about how work requirements cause Medicaid recipients to lose coverage, The Commonwealth Fund said there's been little talk about how work requirements will affect providers.
To gauge that, researchers explored how the Arkansas waiver has impacted hospitals so far. Arkansas is one of seven states that received Section 1115 demonstration waivers from CMS to require Medicaid beneficiaries to work in order to receive benefits and was the first to implement the requirement.
The Arkansas regulation is for people between 19 and 49 who receive coverage through Medicaid expansion. More than 18,000 people lost coverage in the first four months. Those people either didn't work or didn't report that they had worked.
The results would not be quite the same for states that design their waivers differently. Indiana has the requirement for all Medicaid beneficiaries up to age 59 and Kentucky extends that to 64. Wisconsin only requires work for childless beneficiaries until the age of 49.
The report found that states with large Medicaid populations will get whacked more than others, especially rural hospitals, which are already struggling.
So far, CMS has granted seven states with waivers for work requirements, but another eight states have requested their own waivers. That includes both expansion and non-expansion states.
One reason states are looking at work requirements is the cost of the program. Medicaid expansion added millions of newly insured, but has also caused financial issues for states. A recent HHS Office of the Actuary report projected Medicaid expenditures will grow at 5.7% annually, which is faster than the gross domestic product over the next decade. With that in mind, states are looking for ways to contain costs. One avenue is reducing the number of people with Medicaid.
In his budget plan this week, President Donald Trump proposed federal Medicaid work requirements. Suggesting that all states create work requirements goes against the administration's usual stance of states deciding on their own plans. Trump's budget, which also looks to cut Medicare and Medicaid spending, won't gain enough support on Capitol Hill, however.