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First Approved Medicaid Work Rule on Chopping Block in Kentucky

Nov. 14, 2019, 10:17 AM

Months of negotiations, over a year of court battles, and $100 million have been invested in Kentucky’s Medicaid work requirement program—the first ever approved by the Centers for Medicare & Medicaid Services.

But the first in what became a wave of Medicaid work requirement plans will be washed away with one signature next month.

“In my first week in office I am going to rescind this governor’s Medicaid waiver,” Kentucky Governor-elect Andy Beshear (D) said during his victory speech on the night he unseated incumbent Gov. Matt Bevin (R).

In January 2018 Kentucky arose as a model for Republican-led states seeking to shore up Medicaid budgets and increase workforce participation. Its plan was to mandate that some beneficiaries of the state’s health insurance program for low-income people show they had performed about 80 hours of “community engagement,” such as work or volunteering.

Since then the CMS has approved eight other programs and nine other state plans are pending federal approval, according to a tracker from the Kaiser Family Foundation.

Campaign Fodder

In recent gubernatorial elections, the issue led to sharp contrasts between candidates. Bevin, who lost the Kentucky race Nov. 5 in reddening Kentucky by less than 10,000 votes, had championed the work requirements. He said Beshear and other opponents of the program held the “soft bigotry of low expectations” for beneficiaries because they didn’t expect them to be able to work and meet the requirements.

Beshear often retorted that Bevin wanted to strip insurance from 95,000 Kentuckians—the number of people the state estimated would fall off the rolls under the program. Neither Bevin nor Beshear responded to requests for comment.

Bevin asserted that the work requirements and additional premium increases for Medicaid beneficiaries were necessary to make the program fiscally sustainable in a state with immense pressure to pay down an estimated $40 billion in unfunded pension liabilities. He also said the waiver would save roughly $331 million annually, though critics questioned that estimate.

“It was really further evidence to me how much more popular Medicaid has become in the last five years,” Joan Alker, executive director and co-founder of the Center for Children and Families at the Georgetown University Health Policy Institute, said. “As someone who has worked on Medicaid for a long time, it’s interesting to see how in relatively conservative political environments Medicaid is something the voters want.”

No Barrier to Exit

Kentucky’s work requirement program is part of Medicaid’s Section 1115 waiver process. That procedure lets states seek permission from the CMS to adjust state Medicaid programs in ways not otherwise permitted by federal law.

As a general rule, states can end these waiver programs unilaterally, Rachel Gershon, senior associate for the University of Massachusetts Medical School’s Center for Health Law and Economics, said. Seven state Section 1115 waivers have been withdrawn, she said.

One of those withdrawals included a work requirement program that Maine Gov. Janet Mills (D) rescinded in January. Her letter arrived at the CMS before the state implemented work requirements, so there was nothing to wind down.

Fully implemented work requirements and increased premiums may take extensive time to undo, but that’s not the case with Kentucky, Dustin Pugel, policy analyst with the Kentucky Center for Economic Policy, said. Despite being the first waiver approved by the CMS, Kentucky’s program is in a strange purgatory that will allow Beshear to exit unilaterally and quickly.

In March a federal court blocked implementation of the work requirements, reasoning that the U.S. Department of Health and Human Services acted in an improper manner by approving the state programs without considering how the waiver could affect beneficiaries’ health insurance coverage.

Lack of Legislation Crucial to Effort

With a flick of Beshear’s pen, Kentucky’s part in that lawsuit will likely end.

“We would expect the lawsuit to go away,” said Ben Carter, an attorney with the Kentucky Equal Justice Center who represents beneficiaries in the dispute.

Because the issue would be moot after the state withdraws, Carter said he also doesn’t believe Attorney General-elect Daniel Cameron (R) will be able to involve himself and protect the work requirements. Cameron’s campaign declined to comment.

“The issue only arises if the state Legislature has passed a law saying the governor can’t withdraw,” Alker said.

Other governors opposed to work requirements haven’t had the power to write them away with a letter. Michigan Gov. Gretchen Whitmer (D) ran a campaign opposing work requirements, but her hands are tied by a state law mandating that the state seek a waiver from the CMS and implement the rules, Alker said.

Republicans hold super-majorities in the Kentucky House and Senate but haven’t moved to require work requirements.

‘Slow Walking’ Work Requirements

The litigation has led other states to pump the breaks. In September, Indiana voluntarily suspended its work requirement program when it was sued by Medicaid recipients. Similarly, Arizona quietly postponed implementing its work requirements on Oct. 17 while the legal battles play out on the legality of the programs.

“These work requirements are expensive administratively for states,” Gershon said. “Going forward, states may be slow walking implementation to some extent or waiting to see when the federal decision comes out and what it says.”

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com

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