Kentucky’s Medicaid Waiver Will Do More Than Just Require People to Work

Following guidance from the federal government on Thursday that signaled a willingness to consider state demonstration projects that include work as a prerequisite for Medicaid coverage, it was widely speculated that Kentucky would be the first state to see its waiver approved.

The state’s waiver, called Kentucky HEALTH (Helping to Engage and Achieve Long Term Health) and a subsequent amendment to the waiver, do indeed include work requirements. If the waiver is approved, with the exception of children, pregnant women, individuals determined medically frail, and adults who are the primary caregiver of a dependent, including a minor child or a disabled adult dependent—beneficiaries would be required to complete 20 hours per week of “community engagement and employment hours.” That period of time, the waiver amendment says, would align Medicaid work expectations with the work hours already required by the state’s Supplemental Nutrition Assistance Program.

Kentucky’s waiver counts a number of activities as “work.” Job skill training, job search activities, education, volunteering and caregiving, among other pursuits would be considered equivalent to standard employment.

These work requirement aspects of the Kentucky HEALTH waiver have been getting the most coverage in the media, and for good reason. If approved, adding work as a condition for Medicaid coverage constitutes a massive shift in federal policy—no prior administration has ever before given the go-ahead to link health coverage to employment. But, there’s more to the Kentucky waiver than just work requirements. The waiver would also make big changes to the state’s system regarding premiums and beneficiary lockouts.

What Will The Waiver Mean for Premiums?

The waiver, if approved, would impose premiums on non-disabled adult Medicaid beneficiaries on a sliding scale based on family income. At the bottom end of that scale, individuals with family incomes below 25 percent of the federal poverty line would have to pay $1 a month. At the upper end of the scale individuals whose family incomes range from 100 to 138 percent of the FPL would pay a maximum of $15 per month. Premiums would be set to increase in the third year of enrollment. And, premiums would be a condition for eligibility for those with family incomes in the 100 to 138 percent FPL range.

Kentucky would not be the first state to mandate that specific groups within Medicaid pay a monthly premium. Pennsylvania, Iowa, Indiana and others have also tried this brand of Medicaid cost-sharing.

Champions of these Medicaid reforms say that they save state governments money, and give individuals a stake in their own health care—the “skin in the game” argument, if you will. But, others claim that rather than improving outcomes, premiums for Medicaid beneficiaries simply make the whole system more unwieldy, inefficient and expensive for the state governments tasked with administering the programs.

In a 2015 piece in The New Republic, Matt Salo, the executive director of the National Association of Medicaid Directors was quoted as saying, “what we’re talking about does add a layer of complexity to an already complex program,” when asked about proposals that include premiums and other cost-sharing features.

And, setting aside the impact on the state government, research also finds that imposing premiums on beneficiaries has the effect of discouraging enrollment. One study in Health Affairs, for example, found that among children with family incomes of 101 to 150 percent of the FPL, a $10 increase in monthly premiums was linked to a 6.7 percentage point decrease in Medicaid or Children’s Health Insurance Program coverage and a 3.3 percentage point increase in uninsurance.

What About Lockouts?

Under the waiver, Kentucky Medicaid beneficiaries may be disenrolled and subsequently locked out of the program for a number of reasons.

Beneficiaries whose family incomes are above 100 percent FPL who fail to pay their premium after a 60-day grace period would be disenrolled and locked out of the system for 6 months. Those individuals would stay locked out for the duration of that time unless they pay the past due premiums or complete a financial or health literacy course.

Likewise a beneficiary would also be locked out of eligibility for Medicaid for a period of six months if they do not make timely report changes to their income and employment status.

Prior administrations have never approved an 1115 waiver that includes lockouts. When, in 2015, CMS denied a waiver request from Indiana that included the feature, CMS’ Medicaid director at the time, Vikki Wachino, replied in a letter saying, “authorizing a lockout for individuals at any income level … is not consistent with the objectives of the Medicaid program, which include ensuring access to affordable coverage.”