Will Medicaid work requirements work for SC? Try pairing them with added coverage

Gov. Henry McMaster says he wants to “help South Carolinians in need find their path to gainful employment” by taking advantage of the federal government’s plan to let states impose work requirements on Medicaid recipients.

The Centers for Medicare and Medicaid Services says work requirements cannot apply to children, pregnant women, the elderly or people with disabilities, and it suggests exempting such groups as primary caregivers and victims of domestic violence. These exemptions would significantly reduce the number of people affected. After all, two-thirds of S.C. Medicaid participants are children.

Who would be subjected to the new mandate? The custodial parents or guardians of Medicaid-enrolled children, but only those with incomes below 67 percent of the federal poverty line. If that seems like an overly-complex answer, then it’s important to understand how coverage works in our state.

Adults without dependent children, along with custodial parents making more than 67 percent of poverty, are generally ineligible for Medicaid. However, both groups can receive subsidies to purchase health insurance on the exchange if their incomes exceed 100 percent of poverty.

Consider the real-world example of a young mother caring for a Medicaid-enrolled child. She has coverage if she makes less than $11,028 (Medicaid) or more than $16,460 (exchange), but if she earns anything in between, she goes uninsured. If this seems absurd to you, then you’re right. And that’s actually key to the best way to make the work requirements work, but we’ll come back to this.

SC Gov. McMaster wants to require some Medicaid recipients to work

First, let’s talk about the Medicaid work requirements. “Work requirement” is actually shorthand for what the Centers for Medicare and Medicaid Services calls “community engagement,” which covers not just employment and continuing education but also care-giving, volunteering and receiving treatment for substance abuse. The government cites research associating community engagement with better health and well-being and argue that the former causes the latter. Although it likely has this relationship reversed (how can you work if you’re not healthy?), it deserves some credit for adopting a broad definition of engagement that respects the needs of the vulnerable and widely varying Medicaid population.

Thoughtfully applied, these new requirements could help Medicaid recipients pursue educational goals or find better-paying jobs. After all, most Medicaid beneficiaries in South Carolina are already working. Among those who are not, 52 percent are disabled or too sick, while another 32 percent act as caregivers. Community-engagement requirements shouldn’t punish the sick or discriminate against those with disabilities; if anything, we should help them get the care they need so they can return to work and lead more fulfilling lives.

It is true that community-engagement rules may help lead Medicaid beneficiaries to work or education, but it is also true that one of the biggest deterrents to work is the coverage gap for custodial parents who make between 67 percent and 100 percent of what the federal government calls a poverty income. Our state’s actuary has estimated that, if given the opportunity, fewer than 30,000 of these parents would likely enroll in coverage. That’s far less than a tenth of those who would have been covered by Medicaid expansion.

Only two states have received federal approval for community-engagement standards so far. Kentucky expects 95,000 recipients to fall off the rolls, saving the state millions of dollars in annual premiums. Since South Carolina is not a Medicaid-expansion state, the impact here would be notably smaller, but still significant. In fact, the number losing coverage for failing to meet community-engagement standards would likely be about the same as the number who would gain coverage if we closed the coverage gap for working custodial parents at the same time.

Think back to the young mother making $11,000. If she gets a raise or puts in a few extra hours, she’ll lose her health insurance. How is that an incentive to work?

If we want to “help South Carolinians in need find their path to gainful employment,” then there is an obvious bipartisan solution: Adopt thoughtful community-engagement requirements, but only as part of a package that uses the savings to close the coverage gap for custodial parents who make between 67 percent and 100 percent of the poverty line.

This story was originally published February 7, 2018 at 10:28 AM with the headline "Will Medicaid work requirements work for SC? Try pairing them with added coverage."