Would Work Requirements Cut Medicaid Costs?

Yahoo

05-05-2025

Congressional Republicans are currently looking to slow the growth of federal Medicaid spending, which has surged from $161 billion to $616 billion over the past two decades. Although only 17% of Americans support reducing Medicaid spending; 62% support requiring most adults to work in order to gain eligibility. But, while work requirements command broad appeal among legislators, they are unlikely to greatly reduce the program's costs.
Work requirements are generally sought as a way to mitigate the program's work disincentives. Medicaid's expansion to able-bodied adults under the 2010 Affordable Care Act provides comprehensive healthcare benefits (worth an average of $7,711 in 2023), which individuals would lose if they earned more than $20,120 – about the level of someone working full time at the minimum wage in most states.
In 2017, when the House of Representatives sought to permit states to condition Medicaid benefits for 'nondisabled, nonelderly, nonpregnant adults' on individuals' 'participation in work activities'; companion legislation was blocked in the Senate. But the first Trump administration approved 13 waivers for states to implement similar work requirements. These typically required Medicaid beneficiaries to dedicate 80 hours per month to work, volunteer activity, full-time education, or job training, while exempting those who were disabled, pregnant, medically frail, or personal caregivers. But such Medicaid work requirements were struck down by the courts for all states except Georgia (which used non-ACA expansion funding).
Scholars at the liberal Center for Budget and Policy Priorities argue that 'work requirements have no upside.' Noting that only 6,500 out of 240,000 potentially eligible for the program in Georgia enrolled, they suggest that the burden of compliance pushes people off benefits without increasing work.
People can't live solely from healthcare benefits the way they can from cash. In some circumstances, providing medical care to those with serious health problems might actually help them return to work. The work disincentives resulting from Medicaid's means test might also be mitigated by the ACA's subsidies for those with higher incomes to purchase health insurance.
To assess the effect of Medicaid work requirements, Harvard economists examined Arkansas's requirement for beneficiaries aged 30 to 49, which was in effect from 2018 to 2019. They found a 13.2 percentage point reduction in enrollment relative to other age groups, and a 7.1 point increase in the percentage of that cohort who were uninsured – even though 95% of those effected by work requirements satisfied them or should have qualified for an exemption. The study found little impact on employment levels – with the target population averaging 17.1 hours of work per week in Arkansas, compared with 18.2 hours in other similar states.
Influenced by the Harvard study, the Congressional Budget Office estimate that permitting Medicaid work requirements nationwide would reduce Medicaid enrollment by 0.6 million and federal spending by $109 billion over 10 years. But CBO contrasts the minimal impact on employment of Medicaid work requirements with substantial increases in employment experienced following welfare reform, which established similar requirements for cash benefits in the Temporary Assistance for Needy Families program.
However, the increased employment associated with TANF might be misleading. Welfare reform did not simply apply work requirements to TANF cash benefits, but largely shifted that program's funding away from means-tested cash benefits to employment support services. The number of beneficiaries of cash benefits fell by 85%, with many states now spending close to nothing on them.
TANF's bigger lesson may be about how federalism distorts work requirements. Under block grants, TANF imposed only loose work targets, which states could easily satisfy by sanctioning token employment arrangements. Those states who desired to maintain the status quo ante, and hand out welfare benefits with little regard to work, could easily do so. The statutory work requirements proposed for Medicaid would be entirely optional – and impose no obligations on states at all.
That likely explains why the proposal has faced less political push-back than other proposed cuts to Medicaid. It should also call into question the idea that work requirements would reduce federal spending. CBO's estimate was based on the economic effects of work requirements implemented as in Arkansas. But it does not incorporate an assessment of the political question of whether other states will respond to a change in federal law by seeking to emulate Arkansas.
In fact, even where states choose to implement arduous Medicaid work requirements, this may not generate substantial savings for federal taxpayers. The federal government currently provides $9 for every $1 that states spend on Medicaid services for beneficiaries under the ACA's expansion of the program. Rather than reducing states' desire to take full advantage of an extraordinarily lucrative arrangement, work requirements may just make it easier for states to concentrate those funds on preferred constituents. In some cases, they might actually increase the program's cost – by making it easier for red states to justify expanding the program's eligibility to able-bodied adults, where they had previously chosen against doing so.
In practice, Medicaid work requirements are likely to be very loose, and to do little either to save taxpayers money or to oblige people to assume full-time employment. Time limits on eligibility would likely do a better job of deterring undue dependence on public funds by those who are able to work, while also providing more support for the receipt of medical care by those who have temporarily fallen on hard times.