In response to guidance from the Department of Health and Human Services and the Centers for Medicare and Medicaid Services (CMS), Medicaid policies are being implemented to foster personal responsibility in the form of increased beneficiary payments, work incentives, and ‘nudges’ towards healthy behaviors. These policies are rooted in the idea that beneficiary engagement will lead to more prudent use of health services and lifestyle choices resulting in better health outcomes.

Proponents of these new Medicaid policies suggest that requirements will promote personal responsibility, familiarize beneficiaries with private health insurance models, and ultimately transition beneficiaries to other health care coverage. Opponents note that these policies may unnecessarily decrease Medicaid enrollment and health care service utilization, not be understood by beneficiaries, and significantly increase states’ administrative burden. Regardless of viewpoint, the growing number of alternative approaches to Medicaid begs an important question: what lessons from public health, behavioral and labor economics, an analysis of insurance markets, and other disciplines can help predict what effect these personal responsibility provisions might have in Medicaid?

On September 7th AcademyHealth hosted an invitational meeting on “Medicaid and Personal Responsibility,” under their AHRQ-sponsored Research Insights series, to examine the state-of-the-research on work incentives, cost sharing, healthy behaviors, and Medicaid waiver implementation challenges. Major discussion points are summarized below.

Work Incentives: Not New to Welfare, but New to Medicaid

Welfare policies requiring employment and certain personal behaviors in exchange for benefits are hardly new to the U.S. welfare system. Legislation signed into law by President Clinton in 1996 began the era of “Welfare-to-Work,” pushing the welfare system further toward work-benefit stipulations. While these initiatives primarily targeted cash-transfer welfare programs, Medicaid remained untouched by welfare-to-work requirements. That changed in 2018 when CMS issued a new policy direction prompted the Trump Administration and authorized several states to implement Medicaid work requirements.

Meeting participants noted that labor economics, behavioral and economics, and lessons from welfare-to-work initiatives may help signal the potential impact of work requirements on Medicaid. Overall, however, it remains unclear whether the principles of welfare-to-work apply to health care provision. Moreover, limited federal funding allocated to facilitating beneficiaries’ transition to employment distinguish recent policies from those in the 1990s.

  • Economics of Work Requirements: While welfare programs are known to reduce labor supply, individuals are rarely in control of whether there is employer demand for their labor, which may pose a challenge for Medicaid beneficiaries subject to work requirements. Moreover, even small costs produce significant behavioral changes, such as the cost of filing paperwork to document work requirement completion. Finally, while there is a positive correlation between working (or income level) and overall health, causation is less clear.
  • Lessons from Welfare-to-Work: There are indications that work requirements produce modest, positive employment effects over the short term (four to five years), and that requirements successfully lower welfare program enrollment. Individual income levels, however, remain largely unaffected, as new income earned through employment is offset by the loss of previous welfare benefits.

Other Personal Responsibility Provisions in Medicaid

Other personal responsibility provisions within Medicaid are less recent than work requirements. Section 4108 of the 2010 Affordable Care Act (ACA) provided funding that allowed states to implement and evaluate incentive programs in Medicaid for healthy behaviors, such as smoking cessation and preventative care, through cash and other incentives. Additionally, cost sharing mechanisms, such as Health Savings Accounts (HSA), began finding their way into Medicaid programs around 2014. A summary of discussion points is below:

  • Healthy Behaviors: Lessons from ACA Section 4108 programs and SSA Section 1115 Waivers provide insight into Medicaid policies that encourage healthy behaviors. While most 4108 programs offered “carrots” to incent healthy behavior, recent 1115 programs have largely turned to “sticks,” likely as a result of limited federal matching and budget neutrality constraints at the state-level.
    • Lessons from ACA Section 4108 Case Studies: Ten states were given a total of $85 million to test various Medicaid Incentives for Prevention of Chronic Diseases (MIPCD). Incentive programs focused on smoking cessation, diabetes, obesity, high cholesterol, and high blood pressure. Two of the six states made progress on smoking cessation while three other states saw increases in diabetes prevention class attendance.
    • Lessons from SSA Section 1115 Waivers: Iowa, Michigan, Indiana, and Kentucky incented healthy behaviors include completion of health risk assessments, preventative dental or health exams, and smoking cessation, among others. Results have been mixed, but a common theme across programs is that the majority of beneficiaries affected were unaware of the programs, which may have limited the impact of the incentive programs.
  • Cost Sharing: Cost sharing can take on several forms, including premium payments, contributions to health savings accounts, and co-payments. Enforcement is a key issue with cost sharing in general because of third-party payers and beneficiaries’ lack of program knowledge. Moreover, policy details, including the dollar amount of premiums and co-payments, and the penalties imposed for missing payments, significantly affect program outcomes.
    • Premiums: Higher premiums are consistently found to reduce enrollment and lead to disenrollment. The magnitude of these effects varies, however, likely due to alternate coverage options, income level, and interactions with other social insurance programs.
    • HSAs: Several states have experimented with Medicaid HSAs. While Michigan’s program seemed to achieve the desired effect of promoting health care cost awareness, Arkansas was forced to abandon its program within two years due to administrative costs. A survey regarding Indiana’s program indicates that program complexity diminished transparency.

Implementation Challenges

States and individuals will likely bear new costs associated with recent Medicaid policies. Discussants noted that some policies, such as HSAs, seem easier to implement than others, such as work requirements.

  • Cost to Individuals: Three metrics can help determine how implementation has affected Medicaid beneficiaries: duration of health care coverage gaps, reasons for Medicaid loss, and subsequent alternate coverage (or lack of coverage) for dis-enrolled beneficiaries. Information from 2016 indicate that the majority of coverage gaps already exceed one year, loss of Medicaid is primarily due to a change in income or age, and more than half of those who lose Medicaid lack health care coverage.
  • Cost to States: It is not clear whether costs saved via decreased Medicaid enrollment will offset new costs stemming from IT integration, beneficiary outreach, and tracking compliance. Moreover, as many state agencies are short-staffed, the opportunity costs of implementing new policies at the expense of foregoing other priorities may be significant.

While previous research may provide insight on the potential impacts of new Medicaid policies, program details are notoriously bedeviling. Policy complexity, opportunity costs, negative health effects from dis-enrollment, and the difficulty of studying not just beneficiaries impacted by the provisions but those who consequently never sign up for Medicaid, represent just a smattering of challenges and avenues for future research.

AcademyHealth is hosting a public webinar on Medicaid and Personal Responsibility on Monday, September 24, to continue this dialogue. Register to attend this free webinar here.

David Lebhar profile

David Lebhar

Student - Indiana University

David Lebhar is a Master of Public Affairs student at Indiana University’s School of Public and Environmental ... Read Bio

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