States’ Complex Medicaid Waivers Will Create Costly Bureaucracy and Harm Eligible Beneficiaries
Executive Summary
Numerous states have proposed or are considering Medicaid demonstration projects, or "section 1115 waivers," that would take coverage away from people who don't meet work requirements, pay premiums, or renew their coverage on time, and the
Challenges for states. To implement pending and proposed waivers, states will need to undertake a variety of difficult tasks, including: substantially modifying their eligibility systems, creating new systems for beneficiaries to document compliance with the new rules, evaluating this large volume of documentation, informing beneficiaries of the new rules, establishing new systems to exchange data between Medicaid and other programs, acquiring or making new use of claims data from Medicaid managed care plans, training and/or hiring additional caseworkers to make determinations about exemptions and other new rules, and hiring additional staff to address a higher volume of appeals related to coverage denials.
States are also required to develop new processes to identify and assess people protected by the Americans with Disabilities Act (ADA) and either offer them reasonable accommodations that would allow them to meet the new requirements or exempt them from the requirements altogether.
Challenges for beneficiaries. Even beneficiaries who meet rigid new work requirements, pay premiums, and comply with new procedural requirements will face significant obstacles to keeping their coverage. For example, people who are working or participating in work-related activities will need to understand the following: which activities qualify toward the requirement and how many hours they must complete (which would vary over time in some states), how to document their hours in these activities, and how to obtain appropriate documentation (for example, from multiple employers). They also must understand how to report compliance with the work requirement through state-prescribed processes and in accordance with sometimes tight deadlines (for example, within five days of the end of the month in
Likewise, people eligible for exemptions from work requirements will need to understand the criteria for exemptions, obtain documentation to prove they are exempt, sometimes report sensitive health or other information to state caseworkers (regarding a substance use disorder, for example), submit documentation to the state in accordance with state specifications (
This added complexity will lead to high administrative costs for states and the federal government and substantial coverage losses among eligible people, as explained below.
High administrative costs for states and the federal government. Implementing the steps described above will cost states and the federal government (and in some cases counties) tens of millions of dollars for eligibility system changes, notices, and increased staff to track compliance, address questions, and handle appeals. A large share of this spending will go to information technology (IT) vendors and other contractors to change notices and forms, reprogram eligibility systems to add and track the new requirements, and establish mechanisms to track premium payments. States will also need to hire staff to administer and monitor compliance with the myriad new requirements.
For example:
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* In Minnesota, counties (which determine Medicaid eligibility in that state) would have to spend an estimated
See the Appendix for a more comprehensive list of available state estimates.
While states and the federal government may ultimately save money on net from the new policies, savings will come entirely from people losing coverage and access to care. Effectively, these proposals divert some state and federal resources from paying for health care to paying for new bureaucracy.
Moreover, while federal matching funds are available for system changes and increased staffing, no federal funds are available to provide transportation, child care, or job training to help people find jobs and meet the new requirements. If states choose to provide any services to help enrollees meet new requirements, they will generally bear the full cost of doing so.
Substantial coverage losses among eligible individuals. Evidence from other eligibility restrictions in Medicaid shows that many eligible people will not overcome the substantial barriers that complexity creates to maintaining coverage. For example, when
Certain vulnerable groups are particularly ill-equipped to cope with additional red tape, which is why studies of work requirement policies in other federal programs have found that people with physical disabilities, mental health needs, and substance use disorders were disproportionately likely to lose benefits, even though many should have qualified for exemptions. Likewise, people experiencing homelessness or housing instability are especially likely to get tripped up by requirements to renew their coverage on time, since they may never receive the mail that instructs them to do so.
State errors in implementing new requirements will lead to additional coverage losses among eligible individuals. Even with large investments in new bureaucracy, past experience from Medicaid and other programs shows that states will still make mistakes, especially as they implement major systems changes. In fact, two states with newly approved waivers,
The net result is that many or even most of those losing coverage under new state waivers may be eligible enrollees. For example, among Medicaid enrollees who could be subject to work requirements under CMS guidance, more than 90 percent are working, in school, or report that they are unable to work due to illness, disability, or caregiving responsibilities. As noted, past experience with introducing or removing red tape or paperwork requirements in Medicaid suggests that coverage losses or interruptions in coverage could affect many more eligible individuals than the individuals who are the notional targets of the policy.(2)
Complexity of New Policies Creates Major Implementation Challenges for States
Just to implement and enforce policies such as work requirements, premium payments, and lock-outs (see box) -- without taking any steps to help Medicaid enrollees enter or succeed in the workforce -- will require major changes to states' systems and processes. Key tasks for states include:
* Programming extensive new rules into eligibility systems and adding new fields to applications and other documents to reflect new requirements that beneficiaries must meet to establish and maintain their eligibility.
* Establishing web portals for beneficiaries to report exemptions from, and compliance with, work requirements.
* Creating multiple notices to inform enrollees of complex new requirements, including criteria and processes to obtain exemptions, how to report compliance, "good cause" reasons for non-compliance, appeals processes, and penalties for non-compliance.
* Establishing or modifying interfaces with eligibility and employment and training systems in the
* Connecting to Medicaid claims data usually maintained by multiple managed care organizations in the state to determine who qualifies for work requirement exemptions because they are medically frail.
* Establishing mechanisms to determine the correct premium amount based on beneficiary income, both initially and when beneficiaries report changes, and to report premium obligations to managed care organizations that collect the premiums.
* Creating the infrastructure necessary to collect and track premium payments (the cost of which may substantially exceed the amount collected), usually in coordination with managed care organizations.(4)
* Developing systems to ensure beneficiaries pay no more than 5 percent of their income in out-of-pocket costs (the limit set by federal law), which requires tracking premiums and cost-sharing payments to providers on a monthly or quarterly basis and providing monthly or quarterly statements to beneficiaries.(5)
States will also need to train eligibility workers, who often work on other programs in addition to Medicaid, to take on new duties. And they will likely need to hire additional staff to:
* Process exemptions from work requirements and quickly determine whether to grant requests for "good cause" exceptions to avoid termination of coverage for failure to meet the requirement in a particular month.
* Regularly review enrollee reports of hours spent on work and work-related activities to determine if enrollees are eligible to stay covered.
* Process an increased volume of re-applications from those losing coverage, which will require a determination of factors such as whether the enrollee had good cause for not complying, has met the conditions for reinstatement, or has completed a lockout penalty.
* Track benefit receipt and compliance to determine the applicable hourly work requirement (in states where the hourly requirement varies by months of Medicaid participation) and whether enrollees have used up allowable months of coverage without complying in states that allow a grace period.
* Terminate coverage and impose lockout periods for non-compliance.
* Collect, process, and track premium payments in coordination with managed care organizations, which may conduct some of these activities.
* Determine an applicant's or enrollee's exact income to determine the premium amount, likely requiring additional documents from enrollees.(6)
* Handle what will likely be a substantial increase in appeals for enrollees terminated from coverage.
States are also required to identify people with disabilities who are protected under the
* Assessing an enrollee's circumstances to determine whether they are entitled to protection under the
* Exempting individuals determined unable to participate in work or work-related activities or unable to comply with other requirements due to disability.
* For those not exempt from the work requirement, modifying the number of hours of required participation based on the individual's circumstances.
* Providing appropriate supportive services if necessary to make participation possible.
Complexity of New Policies Creates Major Challenges for Eligible Individuals
To keep their coverage in states with waivers, Medicaid enrollees must not only comply with the new requirements related to work or premiums but also meet strict time limits and complex procedures for reporting and documenting their compliance. Tripping up on any of these rules could cause them to lose coverage.
Work Requirements
In states imposing work requirements, enrollees who are working or engaged in other qualifying activities for a sufficient number of hours each month will have to:
* Understand which activities qualify. Enrollees may not realize that certain activities, such as volunteering, searching for a job, or attending school can help them meet the work requirement, or understand how many hours they can count. For example, in
* Understand how to document their hours. Even if they know which activities qualify, they will have to figure out how to document that they are engaged in one or more of those activities for the required number of hours each month.
* Understand how many hours they must complete. In some states, the hourly requirement varies based on how long someone has been enrolled in Medicaid. For example,
* Report compliance with the work requirement according to the state's specification. Enrollees will have to regularly report on the hours they worked or engaged in other qualifying activities to continue receiving benefits.
* Report compliance in time to meet often tight deadlines.
In these states, enrollees eligible for exemptions from these requirements will need to:
* Understand the criteria for exemptions. All states must exempt enrollees who are "medically frail," but how states interpret this term and similar terms such as "serious and complex medical condition" may be hard for beneficiaries to understand. Beneficiaries also may not know that other activities, like caring for an ill person or participating in drug and alcohol treatment, qualify for an exemption.
* Obtain documentation to prove they are exempt. Most states require beneficiaries to submit proof that they qualify for an exemption, sometimes using a specific form. Beneficiaries must bring this form to a doctor or other professional to complete, which may be difficult if they lack health insurance and haven't been receiving regular care.
* Submit documentation to the state. Enrollees will have to submit the necessary paperwork, often through an online portal. This portal may be difficult for some to access and use, and beneficiaries may have trouble reaching caseworkers to ask questions or get assistance. In
* Share sensitive information with caseworkers. States with approved work requirements either count substance use disorder treatment as a qualifying activity or exempt people in treatment from the work requirement. But to get an exemption or count treatment as a qualifying activity, people with such disorders would have to disclose their current or past substance use.(10)
* Periodically renew their exemptions. Enrollees who successfully claim an exemption may periodically have to prove that they continue to qualify. According to its proposal,
Premiums
In states imposing premiums, enrollees will have to:
* Understand whether they are required to pay premiums. In many states, enrollees may or may not be required to pay premiums depending on their income, how they qualified for Medicaid, and what plan they are enrolled in.
* Remember to pay premiums each month. Unlike in private insurance, where employers deduct premiums from paychecks, Medicaid enrollees must drop off or mail premium payments each month.
* Figure out how to pay premiums. Some states restrict the acceptance of cash payments for premiums, which creates additional logistical challenges for a population that may rely more heavily on cash. For example, in
Unlike work requirements, which were never allowed in Medicaid until this year, several states have experimented with charging premiums, so there is evidence of the effects of the associated hassles on coverage. In
Lockouts
In states locking enrollees out of coverage for failure to complete renewals, beneficiaries seeking to comply with the requirements -- and who in fact remain eligible for Medicaid -- will still face challenges, including:
* Not receiving renewal notices. Enrollees may not receive renewal notices if they move or have problems receiving mail. This is a particular problem for beneficiaries who are experiencing homelessness or housing instability. In 2016, 1.4 million people spent at least part of the year in a homeless shelter, and many times that number experienced evictions or other types of housing instability.(13)
* Not knowing what information they need to submit. Redetermination of eligibility is a complex process, often requiring beneficiaries to complete and submit renewal forms and pay stubs and other supporting documentation.
* Not realizing that they may need to turn in renewal paperwork, even if they do not currently need Medicaid coverage. Some enrollees may let their coverage lapse because they got a job and no longer qualify for coverage. If they lose their job and reapply for Medicaid, they may find they are locked out of coverage. In
In states implementing lockouts for failure to meet work requirements, pay premiums, renew coverage, or report income or other changes on time, individuals who qualify for an exception from the lockout or are eligible to resume their coverage will need to:
* Understand and claim exceptions to the lockout. Most waivers provide "good cause" exceptions for failing to complete a required activity, such as hospitalization, eviction, or natural disaster. However, these vary among the different requirements and are difficult to understand and claim, particularly if an enrollee is experiencing a severe crisis. Moreover, the time lag between submission of a claim for an exception and the state's determination of whether good cause exists will likely still leave people facing gaps in coverage.
* Understand how to regain coverage. Some states provide a path back to coverage during the lockout, but enrollees may not understand the requirements, which may also be time consuming and burdensome. For example,
* Know how long to wait before they reapply. Individuals can reapply after the lockout period but must understand what that timeframe is. In some cases, it is a set number of months, in others the rest of the calendar year.
Complexity Will Significantly Raise Administrative Costs
Implementing the steps described above will cost states and the federal government hundreds of millions of dollars for eligibility system changes, notices, and increased staff to track compliance, address questions, and handle appeals. A large share of this spending will go to IT vendors and other contractors to change notices and forms to capture additional information, reprogram eligibility systems to add and track the new requirements, and establish mechanisms to track premium payments. Increased funds are also needed to hire staff to administer and monitor compliance with the myriad new requirements.
The Appendix provides a full list of available estimates of the administrative costs of implementing new requirements, but the following are a few examples.
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In some states, counties would face higher costs as well:
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Notably, some of the additional costs associated with implementing new requirements are fixed costs associated with eligibility system modifications, rather than costs that rise with caseloads. In states that have not expanded Medicaid under the Affordable Care Act (ACA), work requirement proposals will generally apply to comparatively few people, simply because few non-elderly adults not receiving disability assistance are eligible for Medicaid in these states. As a result, these states' per-enrollee costs to impose new requirements will be particularly large.
States will shift a large share of these administrative costs to the federal government. Federal funds will cover 90 percent of eligibility system costs and 75 percent of most staff costs to determine whether Medicaid applicants and beneficiaries comply.(21) While Section 1115 waivers must be budget neutral to the federal government -- that is, federal expenditures with the waiver may not exceed what they would have been without the waiver -- administrative costs are not considered in calculating a waiver's federal budget impact.
In contrast to the enhanced federal match for systems changes and new staff, the federal government won't provide a match for state costs related to employment and training or supportive services to help enrollees find and retain employment.(22)
Complexity Will Cause Many Eligible People to Lose Coverage
Regardless of how much states spend, a large share of enrollees in states with approved waivers are at risk of losing coverage due to their own confusion and state errors. Vulnerable beneficiaries such as those with physical disabilities, mental health needs, and substance use disorders or other challenges like homelessness face especially high risks.
Losing Coverage Due to Red Tape
Even with states' large investments in bureaucracy and new staff, beneficiaries will be left largely on their own to sort through these complex rules and meet the requirements. Most Medicaid enrollees do not directly interact with a caseworker when applying for or renewing coverage and will receive information about the new eligibility conditions through long, complex paper notices.(24) Further, enrollees will be primarily directed to online portals to request exemptions, report compliance and income changes, and pay premiums -- an approach that presents obstacles to enrollees with limited Internet access and doesn't permit them to ask questions about their obligations.
Expecting enrollees to understand the details of complex requirements, and imposing a penalty period for even inadvertent failures to comply, increase the chance that eligible individuals will lose coverage. Moreover, because the re-enrollment provisions are complex, many individuals who are eligible to reapply will likely be unaware they can regain eligibility and will instead go without health care.
Increasing documentation and verification requirements is antithetical to efforts to streamline and simplify the Medicaid eligibility process, which started with the 1997 enactment of the
These changes to the enrollment process addressed barriers that experience shows kept eligible people from getting coverage.(26) For example, when
Barriers to coverage will not affect all beneficiaries equally: vulnerable groups will likely be particularly at risk. For example, mental illness often affects the cognitive functions needed to navigate complex bureaucratic systems, making it hard for someone to qualify for an exemption.(29) Similarly, people experiencing homelessness will likely miss important notices from the state explaining exemptions and paperwork requirements because they lack a reliable address. And, as noted, people with substance use disorders may be unwilling to disclose private and sensitive information regarding their condition and treatment.
Studies of work requirement policies in other federal programs confirm that people with physical disabilities, mental health needs, and substance use disorders were disproportionately likely to lose benefits, even though many should have qualified for exemptions.(30) Those sanctioned were individuals with the greatest barriers to compliance with work requirements.(31)
Losing Coverage Due to State Errors
The new policies in these waivers will disrupt the current streamlined processes by requiring beneficiaries to supply additional information at application, renewal, and in between, much of which will require caseworker intervention to process, likely leading to delays in determinations of eligibility and increased numbers of procedural denials for failure to submit paperwork. Even with additional staff, already under-resourced agencies will likely struggle with these new burdens, resulting in increased backlogs and erroneous determinations.
States' experience with work requirements in SNAP and TANF shows how challenging implementing work requirements and other complex policies will be. A 2016
Specific types of state errors that are likely to occur frequently under the new waivers include:
* Delays and mistakes as states process paperwork related to documenting work hours or exemptions and determine good cause for non-compliance.
* Failure to correctly apply criteria for exemptions and exceptions for non-compliance, particularly in complex cases. Examples include individuals with multiple health conditions that together make it impossible for them to work and cases where the exception criteria are highly subjective, as with "good cause" exceptions for family emergencies or "severe inclement weather."
* Failure to properly identify people protected by the
* Mistakes in tracking compliance and penalty periods.
These errors are especially likely as states start up new systems and in states with newly approved waivers that have struggled to administer even the existing eligibility rules.
Conclusion
Current waiver proposals and recently approved waivers will cause large numbers of eligible people to lose coverage and will increase administrative costs. Those who lose coverage will have less access to care, less financial security, and worse health outcomes. States are essentially redirecting a share of their spending from health care for vulnerable families to complex bureaucracy that beneficiaries will struggle to navigate and states will have difficulty administering accurately.
Appendix: State Estimates of Administrative Costs for Medicaid Eligibility Restrictions
Footnotes:
(1)
(2) In addition, many working people may lose coverage because they do not meet the new work requirements every month. See
(3) See CMS State Medicaid Directors Letter (18-002),
(4)
(5) Medicaid.gov, "Cost Sharing Out of Pocket Costs," https://www.medicaid.gov/medicaid/cost-sharing/out-of-pocket-costs/index.html.
(6) This requirement runs counter to one of the simplifications ushered in by the Affordable Care Act, known as reasonable compatibility, which compares the individual's attestation of income on his or her application or renewal form to data sources such as quarterly wage data or "The Work Number" income database. If both the attestation and the data source are below, at, or above the eligibility threshold, they are considered reasonably compatible and a worker can make an eligibility determination without requiring further documentation, since the precise amount of income is not needed. But by setting premium amounts based on narrow income brackets, states would have to make a more refined income eligibility determination, potentially requiring additional documents from beneficiaries.
(7) "Arkansas Works Information," Notice and Flyer Samples, https://ardhs.sharepointsite.net/ARWorks/default.aspx.
(8) Demonstration Approval of the Healthy Indiana Plan,
(9)
(10) "Harm to People With Substance Use Disorders From Taking Away Medicaid for Not Meeting Work Requirements," Center on Budget and Policy Priorities, updated
(11)
(12)
(13) "The 2016 Annual Homeless Assessment Report (AHAR) to
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21) CMS Letter to State Medicaid Directors (16-004),
(22) See CMS letter to state Medicaid directors (18-002), op cit.
(23)
(24) In Arkansas, for example, the notice to enrollees subject to the work requirement does not include any information on exemptions or protections under the
(25) "Implications of Emerging Waivers on Streamlined Medicaid Enrollment and Renewal Process,"
(26)
(27) "Implications of Emerging Waivers on Streamlined Medicaid Enrollment and Renewal Process," op cit.
(28)
(29)
(30)
(31)
(32)
(33) John L Czajka et al., "Imposing a Time Limit on Food Stamp Receipt: Implementation of the Provisions and Effects on Food Stamp Participation,"
(34)
(35)
(36)
(37)
(38)
(39) Louisiana Legislative Fiscal Office Fiscal Note, SB 188, http://www.legis.la.gov/legis/ViewDocument.aspx?d=1034038.
(40) Michigan House Fiscal Agency Legislative Analysis, SB 897, http://www.legislature.mi.gov/documents/2017-2018/billanalysis/House/pdf/2017-HLA-0897-755E178A.pdf.
(41) Minnesota Management and Budget Local Impact Note, S.F. 3611, https://www.dropbox.com/s/d78ufnkqonrnxfq/SF3611%20Local%20Impact%20Note.pdf?dl=0.
(42)
(43)
(44) Tennessee General Assembly Fiscal Review Committee Fiscal Note, HB 1551 - SB 1728, http://www.capitol.tn.gov/Bills/110/Fiscal/HB1551.pdf.
(45)
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