* State Medicaid section 1115 demonstrations are often used to test innovative or new policies in the program, but some demonstrations that have placed new conditions on eligibility have led to unintended coverage losses and other adverse effects.
* Multiple studies indicate that Medicaid work requirements (also called "community engagement" requirements) can lead to significant coverage losses and worse access to care, without improvements in employment, job training, or other related activities.
* Other demonstration programs, including those using health savings account-like arrangements or healthy behavior incentives, are frequently confusing and produce administrative challenges for beneficiaries, with some evidence that these harmful effects are larger for racial and ethnic minorities.
Section 3 of this Executive Order calls for the immediate review of agency actions related to Medicaid and the ACA, including demonstrations and waiver policies that may reduce coverage.
This issue brief examines policies in four major areas of state Medicaid section 1115 demonstrations: 1) work requirements (also referred to as "community engagement" requirements), 2) healthy behavior incentive programs, 3) health savings account-like arrangements, and 4) capped federal funding and other financing changes. Section 1115 of the Social Security Act gives the Secretary of
Many states have sought to implement community engagement demonstrations, which require beneficiaries to report work or other qualifying activities to the state in order to maintain Medicaid eligibility or receive additional benefits. These demonstrations have the stated goals of improving beneficiary health, employment, and income.
A total of 23 states have submitted section 1115 demonstration projects that include work requirement policies to the
Of these 23 demonstration projects, 13 were approved by CMS (4 approvals have been blocked by the courts), 8 are pending CMS review, and 2 were rejected by the state after CMS approval.
* Five states with approved work requirements -
Overall, work requirements led to a reduction in the share of this population who had Medicaid coverage by 12 percentage points. While most coverage losses were reversed in 2019 when the policy was halted, the temporary loss of Medicaid coverage had adverse consequences. One study found that adults with chronic conditions in
* 50 percent reported serious problems paying off medical bills;
* 56 percent delayed seeking health care because of cost; and
* 64 percent delayed taking medications because of cost./5
Moreover, research suggests that more than 95 percent of adults in this population were already meeting the work requirements or should have qualified for an exemption. A survey of low-income individuals in
The decrease in Arkansas Medicaid enrollment is likely explained by a pervasive lack of awareness and confusion among many Medicaid beneficiaries about reporting requirements related to community engagement activities./6
One year after implementation began, a survey of individuals subject to work requirements found one-third of them had not heard anything about the policy, while 44 percent were unsure whether the policy applied to them./7
Evidence suggests awareness of state work requirement provisions was lower among beneficiaries with less education./8
These findings from
This evidence highlights that largescale difficulties with meeting reporting requirements have posed risks of coverage loss for many beneficiaries across multiple states implementing work requirements.
Other studies indicate that most individuals potentially subject to work requirements are either already working or face substantial barriers to employment. For example, in
Poor physical and mental health also were more common among those in
A survey in
Obstacles to finding new employment have likely grown even larger during the pandemic-related economic downturn of the past year, particularly since job and income losses have been highest among low-income and minority workers, who are disproportionately enrolled in Medicaid./14
Fifty-two percent of lower income Americans live in households where someone has lost a job or taken a pay cut due to the pandemic, compared to 32 percent in upper income households./15
Minorities also experience greater rates of unemployment: in
Households that experienced a pandemic-related job or income loss were two to three times more likely to experience economic hardship than those who did not experience a loss./17
In recognition of some of these challenges, one state -
Furthermore, consistent with the requirements for receiving an increased Federal Medical Assistance Percentage (FMAP) in the Families First Coronavirus Recovery Act, no state is currently implementing community engagement requirements.
HEALTHY BEHAVIOR INCENTIVES
Several states have designed healthy behavior incentive programs with the goals of improving health outcomes, reducing costs, and increasing patient involvement in health care. Nine states have received approval to implement healthy behavior incentives in their Medicaid section 1115 demonstration programs, although two states' demonstrations (
These incentive programs typically promote participation in certain activities theorized to help improve beneficiaries' health. For example, Medicaid beneficiaries in
Healthy behavior incentive programs have experienced low rates of completion of required activities due to limited program awareness. In
The state conducted a disenrollment survey in 2019, which found that only 39 percent of respondents subject to the healthy behavior program had heard of it. Sixty percent had not completed an HRA, and most cited being unaware they were supposed to complete an HRA as the reason. Moreover, 22 percent of respondents were unaware they had been disenrolled and, of those who were aware, 70 percent had done nothing to prepare for disenrollment. Disenrollment had a significant impact on the respondents, with 54 percent lacking health coverage at the time of survey and many reporting delays filling prescriptions or delays obtaining needed medical care./23
A multi-state federal evaluation conducted by CMS found some evidence that financial incentives can increase rates of preventive visits, but found mixed results on whether these policies improve chronic disease management or reduce emergency department visits./24
Despite these challenges, research suggests that states that expanded Medicaid while incorporating healthy behavior incentive programs still experienced substantial coverage gains and improved access to care, compared to non-expansion states./25
HEALTH SAVINGS ACCOUNT-LIKE ARRANGEMENTS
Five states have had section 1115 demonstration projects approved that incorporate health savings account-like arrangements in their Medicaid programs. Again,
While these provisions are intended to increase beneficiary involvement in their health care, research across several states indicates that many beneficiaries do not participate in these consumer-directed provisions, often because of confusion or lack of awareness./26
For example, Medicaid beneficiaries participating in
One survey in 2015 found 39 percent of demonstration enrollees had not heard of POWER accounts and 26 percent had heard of them but were not making the required payments. Only 36 percent of eligible enrollees were making required payments, with the remaining nearly two-thirds potentially subject to loss of benefits or coverage. Nine percent reported being locked out of coverage for failure to pay. Half of individuals cited either affordability (31 percent) or confusion about the accounts (19 percent) as the main reason for nonpayment. Latinos, men, and those with less education were significantly less likely to have heard about the accounts compared to whites, women, and those with more education./26,28
These findings are consistent with the federal evaluation of
By 2019, four years into the demonstration, a second state evaluation in
Overall, the findings from
A state evaluation found of all enrollees who owed payments, 23 percent paid in full, while 48 percent had made none of the required payments./20
The evaluation concluded that required monthly contribution amounts may increase disenrollment among beneficiaries, particularly those without chronic conditions./32
CAPPED FEDERAL FUNDING AND OTHER FINANCING CHANGES
The traditional Medicaid financing structure is open-ended, allowing the 50 states and the
In some circumstances, such as the Medicaid expansion under the ACA, states are given an enhanced matching rate. The federal government initially paid 100 percent of the service costs for newly eligible beneficiaries in the Medicaid expansion population, which gradually decreased to 90 percent in 2020 and thereafter./34
In recent years, there has been interest among some federal and state policymakers to make changes to this structure to cap or limit federal spending, sometimes through what is referred to as a block grant approach.
Under an HAO demonstration, states agree to a limit on federal funding in exchange for waivers to many federal requirements related to Medicaid eligibility, benefits, delivery systems, and program oversight.
Another state -
Under this agreement, CMS and
Thus, if per-beneficiary costs rise faster than the negotiated inflation factor, the state would be at financial risk./38
Critics of this approach fear the potential for enrollment cuts and benefit reductions and have pointed to the increased importance of Medicaid and federal funds during public health emergencies and economic downturns, when states typically face declining revenues and the need for Medicaid coverage increases./39
OTHER ENROLLMENT-RELATED POLICIES
The demonstration projects discussed in this report are not the only policies that risk leading to coverage losses within Medicaid. States have made other changes under section 1115 and other existing authorities such as imposing premiums,/40 eliminating or reducing the statutory period of retroactive eligibility,/41 and increased verification and periodic data matching to identify potential changes in circumstances,/42 all of which can create barriers to enrollment and reduce coverage rates. Between 2017 and 2019, Medicaid enrollment declined by 2.6 percent or nearly two million people, including over one million children./43
State-by-state trends indicate that the decline in Medicaid was too large to be explained by the improving economy, /44 and a federal evaluation linked premiums as a contributor to reduced enrollment in several states./24
At the same time, national survey data show a rise in the uninsured rate between 2016 and 2019, raising additional concern about the impact of these policy changes in Medicaid./45
However, enrollment is increasing during the public health emergency, in part due to the requirement to maintain enrollment for most Medicaid beneficiaries as a condition of states' receiving a temporary increased FMAP./43
In recent years, states have sought demonstration authority to implement work requirements, healthy behavior incentives, and health savings account-like arrangements. These initiatives and other policy flexibilities, to varying degrees, have reduced enrollment and access to care. While capped federal funding demonstrations and other financing changes have not been implemented to date, concerns about the potential for enrollment cuts and benefit reductions are prevalent in the literature.
While one of the stated motivations for several of these demonstration features has been the desire to improve beneficiary health,/31 the loss of coverage evident in multiple studies of these policies suggests they carry a significant risk of having the opposite effect - harms to access to care and adverse health effects. Given the strong evidence linking health insurance coverage to positive health and economic outcomes,/46,47 policies that lead to loss of Medicaid coverage, increase rates of uninsurance, and heighten barriers to medical care can have significant negative public health consequences, particularly during emergencies such as the current pandemic.
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3 Sommers, B. D., Goldman, A. L.,
4 Chen, L., Sommers, B.B. (2020). Work Requirements and Medicaid Disenrollment in
5 Sommers, B. D., Chen, L.,
7 Sommers, B. D., Goldman, A. L.,
9 Hill, I., Burroughs, E., & Adams, G. (2020).
10 Wagner, J., & Schubel, J. (2020). States' experiences confirming harmful effects of Medicaid work requirements. Center on Budget and Policy Priorities.
11 Gangopadhyaya, A., & Kenney, G. M. (2018). Updated: Who Could Be Affected by
12 Venkataramani, A. S., Bair, E. F.,
13 Sommers, B. D., Chen, L.,
14 Gangopadhyaya, A., Garrett, B. (2020). Unemployment,
15 Parker, K., Horowitz, J.M., & Brown, A. (2020). About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19.
17 Despard, M., Weiss-Grinstein, M., Chun, Y. & Roll, S. (2020). COVID-19 job and income loss leading to more hunger and financial hardship.
20 Clark, S., Cohn, L., & Ayanian, J. (2018). Healthy Michigan Plan Evaluation: Report on Health Behaviors, Utilization, and Health Outcomes in the Healthy Michigan Plan.
21 Askelson, N. M., Wright, B., Brady, P. J., Jung, Y. S., Momany, E. T., McInroy, B., & Damiano, P. (2020). Implementation Matters: Lessons From Iowa Medicaid's Healthy Behaviors Program:
22 Wright, B., Askelson, N. M., Ahrens, M., Momany, E., Bentler, S., & Damiano, P. (2018). Completion of requirements in
24 Bradley, K., Niedzwiecki, M., Maurer, K., Chao, S., Natzke, B., & Samra, M. (2020). Medicaid Section 1115 Demonstrations Summative Evaluation Report: Premium Assistance, Monthly Payments, and Beneficiary Engagement. Mathematica.
25 Nelson, D. B., Sommers, B. D.,
26 Sommers, B. D., Fry,
28 Buntin, M. B., Graves, J., & Viverette, N. (2017). Cost sharing, payment enforcement, and healthy behavior programs in Medicaid: lessons from pioneering states.
29 Long, S.K., Coughlin, T. A., Ramos, C., Bart, L., Samuel-Jakubos, H., Govil, M. & Peterson, G. (2020). Federal Evaluation of
31 CMS (2017). Beneficiary Engagement Strategies In Medicaid Demonstrations.
32 Hirth, R., Cliff, E., Kullgren, J., Fendrick, A., Clark, S., Beathard, E. & Ayanian, J. (2018). Healthy Michigan Plan Evaluation: Report on the Impact of Cost Sharing in the Healthy Michigan Plan.
33 Federal Financial Participation in State Assistance Expenditures; Federal Matching Shares for Medicaid, the
35 CMS (2020). SMD# 20-001 RE: Healthy Adult Opportunity.
36 CMS (2021). CMS Approves Innovative Tennessee Aggregate Cap Demonstration to Prioritize Accountability for Value and Outcomes.
37 Galewitz, P. (2021).
38 Buntin, M. B. (2019).
39 Rosenbaum, S., Somodevilla, A., Handley, M., & Morris, R. (2019). Inside
40 Dague, L. (2014). The effect of Medicaid premiums on enrollment: A regression discontinuity approach.
41 Medicaid and
45 Finegold, K., Conmy, A., Chu, R.C., Bosworth, A., & Sommers, B.D. (Issue Brief No. HP-2021-02).
46 Sommers, B.D., Gawande, A.A., Baicker, K. (2017). Health Insurance Coverage and Health - What the Recent Evidence Tells Us. N Engl J Med, 377(6):586-593.
47 Goldin J., Lurie I.Z., McCubbin J. (2021).
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View full text of the report at https://aspe.hhs.gov/system/files/pdf/265161/medicaid-waiver-evidence-review.pdf