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Medicaid Waiver Proposals Creating New Barriers to Coverage, Will Cost States Millions

Numerous states have proposed or are considering Medicaid waivers that would take coverage away from people who don’t meet rigid work requirements, pay premiums, or renew their coverage on time.  In addition to causing large numbers of people to lose coverage and access to care, these policies will be costly for states to implement and enforce.  Effectively, they’ll divert millions of dollars of state and federal resources from providing health care to creating new bureaucracy, as we detail in a new analysis.

To implement the policies, states will have to perform 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, creating new systems to exchange data between Medicaid and other programs, acquiring or making new use of claims data from Medicaid managed care plans, training or hiring (or both) more caseworkers to make determinations about exemptions and other new rules, and hiring more staff to address a higher volume of appeals.  States also must develop new processes to identify and assess people protected by the Americans with Disabilities Act.

Implementing these steps will cost states and the federal government (and in some cases counties) tens of millions of dollars.  Much of this spending will go to information technology vendors and other contractors.

While not all states considering these policies have estimated the cost of implementing and administering them, those that have foresee large costs.

Alaska: A state fiscal analysis of legislation to end Medicaid coverage for people not meeting a work requirement projects implementation costs of $78.8 million over six years, including about $14 million per year in ongoing costs.  Costs include hiring new staff to monitor compliance and process terminations, hiring more administrative law judges to hear appeals of Medicaid terminations, and supportive services to help enrollees meet work requirements.

Kentucky: Kentucky has budgeted $186 million for fiscal year 2018 and $187 million for 2019 to implement its federally approved waiver.  Most of the costs will be for changes to the eligibility system to administer the new requirements.

Louisiana: A fiscal note on a 2017 bill proposing a Medicaid work requirement estimated that changes to the eligibility system alone would cost $4 million in the following fiscal year.

Michigan: The administrative costs of legislation to impose a work requirement on Medicaid enrollees would be $15 to $30 million per year, the House Fiscal Agency estimates. These costs would arise from “added administrative casework and information technology updates required to verify hours worked, qualifying exemptions, and other casework each month.”

Minnesota: Minnesota Management and Budget, the state’s budget agency, released a Local Impact Note on legislation to end Medicaid coverage for people who don’t meet a work requirement, detailing the cost to the counties that determine Medicaid eligibility in the state.  The note estimates that the proposal would cost local governments $121 million in 2020 and $163 million in 2021.  Based on county surveys, the note estimates that counties will need an average of 53 minutes to process an exemption, 22 minutes to refer a client to employment and training services, and 84 minutes to verify noncompliance and suspend Medicaid benefits.  Providing compliance monitoring and employment and training services to enrollees through contractors could cost $1,157 per enrollee.

Ohio: A work requirement would increase costs for counties, which determine Medicaid eligibility in Ohio, by over $378 million over five years to provide case management services to enrollees, the Center for Community Solutions estimates.

Pennsylvania: The Secretary of Human Services testified that implementing Medicaid work requirements in Pennsylvania would cost $600 million and require hiring 300 more staff.

Tennessee: A fiscal note on a new work requirement law estimates that it will cost over $34 million per year to implement, along with $5.6 million in costs to change the new Medicaid eligibility system scheduled to go live next year.

Virginia: A work requirement bill would require $5 million to implement necessary system changes, a fiscal note estimates, and case management costs would be between $7 million and $200 million per year, depending on the services provided.

Notably, states will shift a large share of the administrative costs of the new policies 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.  But 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. And regardless of how much states spend, many eligible enrollees in states introducing these policies will likely lose coverage, because the complexity of the policies will lead to both enrollee confusion and state errors.