States Tighten Medicaid Work Rules, Sparking Lawsuits

As new work requirements for Medicaid beneficiaries take effect in January, several Republican-led states are implementing stricter rules than the federal mandate requires, prompting legal action from Democrats.

At the core of the dispute is how individuals can prove they are too medically frail to meet the work requirements. While federal regulations permit states to accept a recipient's word for the first year, at least six states—Arkansas, Idaho, Indiana, New Hampshire, North Carolina, and Ohio—are now requiring immediate documentation. Advocates argue this could create significant barriers for new applicants to the joint state-federal health insurance program.

"Someone may not be able to work, but they can’t see a doctor because they can’t afford it. So they’re now applying for Medicaid," said Jennifer Tolbert, director of state health policy and data at the research organization KFF. "But Medicaid is saying you need documentation from a provider."

Democrats in 25 states have filed lawsuits, contending that the stricter rules are overly harsh. The changes are projected by the Congressional Budget Office to save the federal government $887 billion over a decade and result in 7.5 million fewer people having health insurance.

Conservative groups, such as the Foundation for Government Accountability, have advocated for states to avoid leniency in enforcing work requirements, arguing that able-bodied adults increase enrollment and costs. Jonathan Ingram, vice president of research and policy at the group, has encouraged states to move away from self-attestation, a process where beneficiaries' claims are taken at face value, calling it "fraud-by-design."

The new federal mandate applies to up to 20 million lower-income adults without children at home who are enrolled in Medicaid through expansions in 40 states and the District of Columbia. Beneficiaries must typically work, volunteer, or attend school for at least 80 hours per month, with exceptions for medical frailty.

Federal regulations define medically frail individuals as those with substance use disorders, disabilities, or serious medical conditions. However, a June rule from the Centers for Medicare and Medicaid Services clarified that a condition must "significantly impair" an individual's ability to work, volunteer, or attend school to qualify for an exemption. States will eventually be allowed to accept self-attestation only once per enrollment period, with documentation required at least annually thereafter.

While states are increasing their use of third-party data, such as workers' compensation claims and prescription information, to verify eligibility, the implementation of these work requirements represents a substantial shift. Many states will need to invest in upgrading their computer systems to manage the changes.

Similar challenges have arisen with other federal law changes, like those affecting the Supplemental Nutrition Assistance Program (SNAP). In Arizona, for example, a 55% drop in SNAP enrollment was attributed to difficulties in implementing new federal requirements, leading to increased call volumes and verification processes.

Patient advocates express concern that the increased administrative burden and documentation requirements will lead to coverage loss. Nate Crippes, a lawyer at the Disability Law Center in Utah, noted that many individuals in his state with Medicaid expansion coverage have mental health or substance use disorder diagnoses. Camille Richoux of Arkansas Advocates for Children and Families stated, "We’re choosing to make people with health conditions jump through a bunch of hurdles."

Additional complexities arise when states rely on diagnosis codes to determine work capability. Lucy Dagneau of the American Cancer Society Cancer Action Network pointed out that diagnosis codes do not always reflect the severity of a condition, potentially leading to incorrect assessments of an individual's ability to work. "Our fear is by that banning self-attestation, unfortunately, the state lawmakers who pass those laws are going to have a hand in more people losing coverage in their state than would have,” she said.