Medicaid Work Requirements Could Cost Hospitals $3.7B

Work requirements could shrink Medicaid rolls and increase uncompensated care costs for hospitals in states that implement them.

Hospitals in 15 states could take a financial hit from shrinking Medicaid rolls if work requirements are mandated for beneficiaries, a new Commonwealth Fund study shows.

However, the design of states' work requirement programs will play a key role in how many beneficiaries lose coverage and the resulting financial hit for hospitals, the study found.

Under most work requirement mandates, Medicaid beneficiaries lose health insurance coverage if they cannot find work, are unable to document the required number of hours of work activity, or cannot document an exemption.

The Commonwealth Fund study estimates that Medicaid work requirements could contribute to an increase in uncompensated care costs for all hospitals across 15 states that have implemented the mandates, or hope to, totaling between $2.5 billion to $3.7 billion in 2019.

Those financial woes could trickle through the communities these hospitals serve in the form of staff reductions and the elimination of services.

"This analysis demonstrates that imposing Medicaid work requirements could have a detrimental effect not only for people who could lose their healthcare coverage, but on hospital finances," said Commonwealth Fund President David Blumenthal, MD.

"The way that states design these work requirements will play a big role in the severity of the loss," he said.

Because most people who lose Medicaid coverage are ineligible for premium subsidies in the health insurance marketplaces and would not have jobs that offer employer-sponsored insurance, many would become permanently or temporarily uninsured.

The study's findings extrapolate the early results of Medicaid coverage loss after Arkansas implemented work requirements in June 2018, targeting enrollees that became eligible through the ACA Medicaid expansion.

The state started work requirements for enrollees ages 30 to 49 and expanded to enrollees ages 19 to 29 in January 2019.

Nearly 8,500 people lost their Medicaid coverage within the first four months of the program. Between 23% and 29% of the targeted population either did not meet the work requirement or failed to report their work activities each month.

Assuming these rates continue, nearly 50,000 (29%) of the state's estimated 167,000 Medicaid enrollees may lose their coverage, the report projected.

Hospitals in Indiana and Kentucky could take the biggest hit because those states apply work requirements to both the traditional Medicaid and expansion populations up to age 59 and 64, respectively.

In Kentucky, for example, Medicaid generates $30.2 million on average for the state's 88 hospitals, but the projected disenrollment could lop up to 22% ($6.7 million) in Medicaid funding, the study said.

In contrast, Arizona, Arkansas, and Ohio will apply work requirements only to the expansion population up to age 49, and the study estimates that hospital Medicaid revenues in those states will decline by 10% to 14%.

Medicaid work requirements would further reduce operating margins for rural hospitals that are already operating at a loss on patient care. For example, Kentucky's stringent requirements could adversely affect hospital operating margins in that state between -1.7% to -3.1%.