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Medicaid showdown in Kentucky centers on whether working improves health

To Kentucky state officials, Medicaid is in need of transformation.

The officials feel that despite the billions in tax dollars the state is spending on Medicaid, which provides health insurance for eligible, low-income Americans, many are still in poor health.

So, under a controversial waiver from federal Medicaid rules it received from the Trump administration on Jan. 12, the state will try to move people off of public health insurance and into employment-based insurance by requiring they work, volunteer or do job training.

"It will be transformational," Kentucky Republican Gov. Matt Bevin said at a news conference announcing the approval by the Centers for Medicaid and Medicare Services, or CMS, to make the changes.

But not everyone agrees.

Three groups — the National Health Law Program, the Kentucky Equal Justice Center and the Southern Poverty Law Center — have sued to halt the changes.

Key to the upcoming trial is whether the changes improve Medicaid because the CMS is only allowed to grant waivers for experimental projects "likely to assist in promoting the objectives" of Medicaid.

Plan putting 'hurdles'

Critics, including Andy Slavitt, CMS' administrator under the Obama administration, say it does not improve the healthcare program, noting that despite the plan's goals, the state estimates 95,000 fewer people will receive Medicaid under the new requirements.

"The purpose of Medicaid is to provide medical insurance to people who cannot afford it, not to create barriers to coverage," said Anne Marie Regan, senior attorney at the Kentucky Equal Justice Center.

"Demonstration waivers are supposed to make access to healthcare easier," she added.

The CMS' decision to grant the state a waiver from Medicaid rules "has very clearly, highly questionable legality," Slavitt said in an interview.

The federal agency's decision, and its announcement on Jan. 11 that it plans to support other requests to require work, is a fundamental shift.

While the federal government has required work or an equivalent, like volunteering or job training, to qualify for other programs such as Aid to Families with Dependent Children and unemployment, previous administrations have not allowed restrictions to be placed on being able to get healthcare.

"It's putting hurdles into place of being able to see a doctor or a physician. It's highly problematic of states to be some sort of judge and decide who's worthy of getting healthcare or not," Slavitt said.

But Gail Wilensky, the former head of the agency's predecessor, the Health Care Financing Administration, said the courts could very well allow the waiver to stand.

The courts have generally seen Medicaid as a state program, jointly funded with the federal government, and given the CMS wide deference in deciding how much leeway to allow states, said Wilensky, who headed the agency under President George H.W. Bush.

Beyond Kentucky, the lawsuit could impact waiver applications from nine other states — Arkansas, Arizona, Indiana, Kansas, Maine, Mississippi, New Hampshire, Utah and Wisconsin — which are also seeking permission to require work.

The CMS and Kentucky officials declined to comment on the lawsuit.

Current system not working

Kentucky officials argued in an overview of the plan called Kentucky HEALTH — an acronym for Helping to Engage and Achieve Long Term Health — that the current system was not working.

The state needs to "change the way we provide support" and "help individuals move from being passive beneficiaries to active participants who are prepared to roll off of Medicaid and into commercial health insurance," the plan overview said.

In addition to requiring able-bodied Medicaid recipients spend at least 80 hours a month doing work, community service or job training, the plan would also require they pay monthly premiums of between $1 and $15.

Those who received Medicaid through the state's expansion of Medicaid would no longer get dental or vision care through basic Medicaid.

But they will be able to earn rewards to pay for the care through various activities like getting preventative screenings such as mammograms, taking courses in weight loss, diabetes management or other programs designed to improve health, getting a GED or completing job training courses.

In approving the waiver, the CMS' principal deputy administrator, Demetrios Kouzoukas, said that Kentucky's plan would enhance Medicaid in a number of ways.

The reward program would encourage more people to get preventative care and "research has shown [work] to be correlated with improved health and wellness," he said.

Kouzoukas also noted that the Kentucky governor had pledged to end Medicaid expansion in his state because of the costs involved.

So, if the waiver reduced the states' costs, it would help "maintain access for currently enrolled populations."

Work requirement may push people to emergency rooms

Wilensky said she had reservations about placing conditions on the poor being able to get healthcare.

But she added that allowing the requirements could make expanding Medicaid more politically palatable in the 18 Republican-led states that have not expanded the program.

However, even some conservatives like Robert Rector, senior research fellow at public policy think tank The Heritage Foundation, question whether a work requirement will simply push people off Medicaid and into emergency rooms.

The Kaiser Family Foundation estimates that 60% of Medicaid recipients nationally already work.

After not counting those with disabilities, going to school and others likely to get waivers from working, only 7% of Medicaid recipients are likely to be affected by the work requirement.

But a Jan. 31 Cowen Washington Research Group note to investors noted that "any loss of coverage would be a negative for hospitals."