Don’t put work-requirements on Medicaid

ONE THURSDAY in January 2018, while cable-news shows were scandalised by the latest leak from the White House, the Trump administration made a change to America’s safety-net. The new rule lets states experiment with forcing recipients of Medicaid to work, volunteer or study in exchange for their government-funded health insurance (see article). It attracted little attention at the time. Yet because about 75m poor Americans rely on Medicaid for their health care, this decision has the potential to affect an awful lot of people.

So far, only one state—Arkansas—has imposed extensive work requirements on Medicaid. Fourteen other states have applied to follow its example. They should look at what has happened in Arkansas and think again.

The theory behind tying cash benefits to work requirements is sound. Asking people to do something in exchange for a payment can build political support for welfare programmes. Without the requirements, beneficiaries are easily dismissed as scroungers. Moreover, encouraging people back into work is the best anti-poverty scheme.

Even so, tying health care to work is a mistake, for two reasons. The first is practical. Safety-net programmes work best when they are simple, well-understood and governed by rules that are easy to administer. The Arkansas experiment fails this test. To be eligible for Medicaid, you must earn less than $17,000 a year and must prove that you are working, studying or taking care of young children or infirm relatives for at least 80 hours a month. Many people who earn so little have unpredictable patterns of work. One month they will put in enough hours to meet the criteria for eligibility, the next they will not.

Worse, Arkansas made it unnecessarily hard for people to register their work effort. In a state with one of the lowest rates of internet usage, Medicaid recipients had to log their working hours on a website that shut down between 9pm and 7am. As a result, 18,000 of the approximately 80,000 people who were asked to report their schedules lost their coverage.

Supposing these problems can be overcome, tying access to health care to work is still wrong, because it is based on a misconception about incentives. When the Trump administration announced the new policy, it observed that “higher earnings are positively correlated with longer lifespan.” That is true, but the White House has the causation backwards: healthy people lead longer, more productive lives. People do not work in order to be healthy; they can work because they are healthy already.

Medicaid does have a problem with work incentives, but it is not the one the White House has identified. When the Affordable Care Act, aka Obamacare, became law, the intention was that low-income Americans would either be eligible for Medicaid or for government subsidies to help them buy their own, private insurance policies. In fact 14 states decided not to implement part of the law. That left about 2m Americans in limbo, earning too much to qualify for Medicaid but too little to be eligible for Obamacare subsidies. In these 14 states, people whose earnings are close to the cut-off for Medicaid eligibility can lose their health insurance if they work a few more hours. This is a huge disincentive to extra work. If states want to fix the real problem with Medicaid, that is where to look.