Medicaid work requirements could cost hospitals up to $4.1B in revenue in 2019—report

health earnings
A Commonwealth Fund report found Medicaid work requirements could contribute to an increase in uncompensated care costs for all hospitals across states that implement them between $2.5 billion and $3.7 billion in 2019. (Getty/turk_stock_photographer)

Efforts to create work requirements for individuals to obtain Medicaid coverage could ultimately result in a loss of revenue of up to $4.1 billion in 2019 due to weakened Medicaid revenues and increased uncompensated care costs, according to a Commonwealth Fund report. 

The report also found Medicaid work requirements could contribute to an increase in uncompensated care costs for all hospitals across states that implement them between $2.5 billion and $3.7 billion in 2019. 

"At a time when many rural hospitals throughout the nation have shuttered, the move to impose work requirements on Medicaid beneficiaries ultimately weakens hospitals," said Allen Dobson, an author of the paper. "Because hospitals are often a major economic engine in a community, these work requirements can hurt the entire local economy."

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RELATED: CMS gives thumbs-up to Medicaid work requirements in Ohio

The report, which looked at states with approved for pending Section 1115 demonstration waiver applications, found the design of the Medicaid work requirements would play a key role on how many beneficiaries lost coverage and the impact on hospitals and their surrounding local economies.

For example, the report said, Medicaid revenues could drop between 10% and 14% in Arkansas hospitals but could decline even more, between 20% and 22% on average, for Kentucky hospitals. The difference in Arkansas? Work requirements would only apply to the Medicaid expansion population up to age 49.

CMS rolled out guidance on these waivers in January 2018, and since then eight states, including Ohio, have had requests approved. Several additional states have submitted waivers that the agency has yet to weigh in on. 

The work requirements have been controversial, as critics argue they go against the goals of Medicaid, which is to provide health coverage to the poor. Two states’ waivers—Kentucky and Arkansas—currently await a federal judge’s decision on their legality.

CMS has defended the waivers, arguing that they promote health and can lift people out of poverty. 

Arkansas is the only state where such work requirements have formally been launched, and in the last several months of 2018, more than 18,000 people lost Medicaid coverage as a result of the work requirement. The Commonwealth Fund report called the early results from Arkansas "striking." 

"Assuming those rates continue, nearly 50,000 (29%) of the state's estimated 167,000 Medicaid enrollees targeted for the program may lose their coverage," the Commonwealth Fund report said. 

RELATED: The four biggest Medicaid controversies in 2018 

Hospitals that expanded Medicaid will experience the largest jumps in uncompensated care, the report said. At the high end, this means Kentucky could see between a 109% and 158% increase in uncompensated care per hospital while Arkansas sees an estimated increase in uncompensated care per hospital between 20% and 29%, it said.

In states that implement Medicaid work requirements, hospital operating margins could drop between -.4 and -2.2 in states, the report estimated.

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