Alabama’s Proposal Will Cost Thousands Their Medicaid Coverage, Won’t Encourage Work

WASHINGTON, March 8 -- The Center on Budget & Policy Priorities issued the following news release:

Alabama, which has refused to expand Medicaid for low-income adults under the Affordable Care Act (ACA), is now proposing to make work a condition of Medicaid eligibility for very low-income parents, stating that it wants to encourage work. Its proposal, however, actually would penalize work: because Alabama hasn't expanded its program, those who comply with the new requirements by working more hours or finding a job will raise their income above the state's stringent Medicaid income limits, thereby losing their Medicaid coverage and likely becoming uninsured.

Specifically, Alabama proposes to require parents with Medicaid to spend at least 35 hours per week (or 20 hours if they have children under age 6) on "employment-related activities" such as work, job training, or job search to maintain their Medicaid coverage. It also proposes to shorten eligibility for what's known as Transitional Medical Assistance (TMA), as explained below, from 12 months to six. These changes will cause a 20 percent drop in Medicaid enrollment for parents beginning next year, according to the state's own estimates.

So far, the Centers for Medicare and Medicaid Services (CMS) has approved Medicaid work requirements in Arkansas, Indiana, and Kentucky -- all states that expanded Medicaid under the ACA. Alabama is the latest in a growing number of non-expansion states (Kansas, Mississippi, and Utah are others) that seek permission to impose work requirements on low-income parents.

Work requirements have a poor record of encouraging work, and, even in expansion states, taking away people's coverage will likely impede work rather than encourage it. But in non-expansion states like Alabama, the rationale for work requirements makes even less sense. Alabama already has the nation's most restrictive Medicaid eligibility rules: it offers no coverage to non-disabled, non-elderly childless adults and only covers parents with children who have incomes up to 18 percent of the poverty line, or a little more than $300 a month for a family of three.

Moreover, cutting TMA eligibility from 12 months to six would further limit coverage options for low-income parents. TMA provides up to a year of Medicaid coverage to parents who lose Medicaid due to increased earnings. At the same time that Alabama seeks to require parents to work, it would roll back a program that encourages work by reducing incentives for families on Medicaid to avoid finding a job or forgoing a raise because that would mean losing their Medicaid.

Alabama says it will provide "workplace opportunities" for Medicaid beneficiaries that will help them increase their income, and that its Medicaid work supports program will "mirror" its Temporary Assistance for Needy Families (TANF) work supports program. In 2016, however, Alabama spent just 2 percent of its TANF dollars on work activities and 2 percent on work supports. Moreover, Alabama's proposal is vague about the work supports it will provide. It doesn't identify any new state spending on work supports; it only says it will give beneficiaries "information" about activities and community supports that will help them meet the requirements, and that it will "make good faith efforts" to connect beneficiaries with child care and transportation assistance.

In Alabama, parents' inability to comply with TANF's strict work requirements is one big reason why the state's caseload has declined so much: in 2016, the state's program reached only 10 families out of every hundred in poverty, down from 17 in 2006 and 32 in 1996.

Alabama says one of the proposal's objectives is to transition people to other health insurance, but very few alternatives are available to people who will lose coverage. Private coverage isn't realistic since most low-income people have jobs that usually don't offer employer coverage. And as residents in a non-expansion state, low-income Medicaid beneficiaries in Alabama who raise their income modestly get caught in a "coverage gap," with income too high for Medicaid but too low to qualify for federal tax credits to help them buy marketplace coverage.

The best way for states to support work among people with low incomes and lift them out of poverty is to adopt the Medicaid expansion. That would extend coverage to working parents in the coverage gap. (It would also extend coverage to adults without children, many of whom are working and who are generally ineligible for Medicaid altogether in non-expansion states.)

Surveys of Medicaid expansion beneficiaries in Ohio and Michigan found that Medicaid coverage made it easier for them to look for work and stay working. And adults in Medicaid expansion states have fewer debts sent to third-party collection agencies than adults in similar non-expansion states. If Alabama were serious about supporting work, it would drop its waiver proposal and join the 32 states (and Washington, D.C.) that have expanded Medicaid.