In a previous blog, we wrote about how states hoping to impose work requirements on their Medicaid enrollees were touting projected cost savings – while failing to mention that these alleged cost savings result from people losing their health care coverage. Now that the Centers for Medicare and Medicaid Services (CMS) has approved work requirements in three states’ Medicaid expansion programs, the true fiscal impact of work requirements are being revealed. The verdict? Savings from work requirements are not what their proponents have promised.

As it turns out, proponents’ fiscal analyses failed to account for the increased costs associated with a work requirement that can stem from: technology costs, new paperwork and notice requirements, staffing needs and increased uncompensated care costs. In addition, some Medicaid expansion enrollees who lose their coverage under the work requirement will re-enroll under the disability eligibility category – where the state has to pay a much larger share of their costs.  

For example, Kentucky initially estimated that instituting work requirements would save about $486 million in the first two years based on almost 40,000 individuals losing coverage. However, in recent budget proposal testimony, Governor Bevin’s office reported that it expects no savings will be realized in the first two years, and instead requested an almost 100 percent increase in the Medicaid Administration budget to implement the program with a work requirement. Even in the later years of the waiver, the state will end up spending more per enrollee than it would have without the waiver, essentially paying more to cover fewer individuals.

Additionally, Virginia’s House of Delegates voted last month to add work requirements to its traditional Medicaid program, and a recent fiscal analysis of the bill estimates that the program could cost up to $100 million in its second year – ten times higher than what the state initially estimated. The estimate is so much higher because it accounts for the costs of not just implementing the work requirement through increased IT infrastructure and staffing, but also the costs of providing support services to help individuals meet the requirement, including transportation and job-training. The analysis also accounts for almost $34 million in increased uncompensated care costs the state will have to spend in 2020 on individuals who would be disenrolled for failing to meet paperwork requirements.

The bottom line is any alleged saving states are predicting based on work requirements are mainly smoke and mirrors because they fail to account for the increased costs associated with the work requirement. In addition, they obscure the true reason behind any savings: they come from individuals losing coverage for failing to comply with the administrative requirements and paperwork deadlines, rather than rising out of poverty.