Will New Medicaid Waivers Collide With State Delivery Reforms?

Health Update

Editor’s Note: In a new blog post for The Commonwealth Fund, summarized below, Manatt Health examines how new Medicaid waiver policies, such as work requirements, will impact state delivery reforms. Click here to read the full post.

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Following the Trump administration’s encouragement to states to consider new Medicaid waiver policies that allow restrictions on coverage, 19 states have approved or pending waivers with coverage limitations, including meeting work and community engagement requirements and paying premiums. Failure to meet these requirements could result in “lockouts” from Medicaid. These fervently debated policies will affect state delivery reform efforts—aimed at improving health and bending the cost curve—in three principal ways.

1. Continuity of Coverage Is Essential to Delivery and Payment Reform

The new waiver policies will almost certainly lead to greater coverage instability, both at implementation and on an ongoing basis. The reasons for likely coverage losses include:

  • The premiums several new waivers impose, some at higher levels than previously, that research suggests many low-income families would be unable to pay consistently
  • The unpredictable and fluctuating schedules common to low-wage jobs that would make it difficult for beneficiaries to meet work requirements
  • The lack of information among even beneficiaries who are working about the need to report their hours, how to report and the deadline for reporting

Lockouts imposed as penalties would exacerbate the instability. Arkansas’ experience is instructive. In the first month in which coverage could be terminated due to newly approved work requirements, at least 55% of the nonexempt expansion adults who were required to report lost coverage.

2. People With Complex Health and Social Needs Are Most at Risk

About 5% of all Medicaid beneficiaries account for nearly half (48%) of program spending. These high-need, high-cost beneficiaries are particularly vulnerable to coverage losses as a result of the new waiver policies. Some may be exempt from work requirements, although there is considerable variation among states. Even those who are exempt, however, will be at significant risk of coverage loss. They may be unaware of the work requirements or the exemption—and, even if they are aware, may be unable to manage the paperwork or electronic portal to secure the exemption.

3. Safety Net Providers Will Be Directly Affected

The new waiver policies will have considerable impact on community health centers, safety-net hospitals, teaching and children’s hospitals, and others that serve a large share of Medicaid beneficiaries. Expansions in insurance coverage, particularly in Medicaid expansion states, have led to drops in uncompensated care and paved the way for these reforms.

The coverage gaps and losses prompted by the new waiver policies, however, are likely to reverse some of these gains. They also will place new burdens on physicians and clinics, with the American College of Physicians expecting an overwhelming number of requests to complete medical forms by those applying for work requirement exemptions.

Conclusion

Like other payers, Medicaid programs have been experimenting with ways to improve care and control costs. The considerable unintended consequences the new waiver policies will have on delivery system and payment reforms warrant careful consideration.