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Opinion | Beware of unintended consequences of Michigan Medicaid work demand

Update: Have an opinion on Michigan’s Medicaid work rules? Weigh in quickly.

On April 10, President Trump signed an Executive Order designed to add work requirements to all public assistance programs. Yesterday, the Michigan Senate State Competitiveness Committee reported out a bill that would require work, education, or other community engagement activities as a condition of eligibility for many Medicaid recipients. And today, the Michigan Senate approved that bill with no amendments.

The Michigan Senate Fiscal Agency estimates that as many as one million of the state’s Medicaid recipients could be affected by the proposed requirements. While encouraging work and other engagement is undoubtedly an admirable goal, it is important to look at what we’ve learned from other work requirement initiatives, and to use those findings to shape the best public policy to achieve that goal.

For 30-some years, America’s eligibility criteria for health insurance and cash assistance were similar—with both programs basing benefits on income and other characteristics. But in the late 1990s, in an effort to “end welfare as we know it,” the programs diverged. The resulting welfare reforms put an end to cash aid entitlements, linking cash assistance to work requirements through a new program: Temporary Assistance for Needy Families (TANF).

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TANF was intended to help families exit welfare through employment and, in the early years, it seemed to be working. But as the boom times of the 1990s faded, jobs became increasingly hard to find. States began to focus on cutting caseloads, rather than helping families find work. The modest employment gains did not persist; those with physical and mental health conditions did not find jobs; and the administrative burden of tracking and verifying hours overwhelmed caseworkers.

Today, there’s lots of evidence that the 1996 reform actually hurt families at the very bottom. Nationally, for every 100 poor families, only 23 receive cash assistance now. Across the country, extreme poverty has more than doubled. And the number of families on food assistance—families with no money to pay for things like rent, toilet paper, or clothes—quadrupled to 1.3 million by 2016. With diminished cash, families in poverty have done all sorts of things to survive. They sell their blood plasma; they sell their food stamps (a felony); and in extreme cases, they use sex to keep a roof over their heads.

In Michigan, the decline in TANF has been particularly large, from serving 88 out of every 100 poor families with children in 1996 to just 14 out of every 100 poor families in 2016—well below the national average. Our analysis finds that nearly 65,000 kids on food assistance live in families reporting no cash income.

Michigan has one of the largest populations of school children who are homeless or unstably housed. Yet the state spends only 10 percent of its TANF dollars on basic assistance, and redirects a third of TANF dollars to “other services,” including college scholarships that go to higher income students.

Ron Haskins, one of the early champions of welfare work requirements, now says that of the program’s two central aims—to “provide income support to poor families while they struggle” and to “help people achieve self-sufficiency”—TANF “now seems to be achieving neither goal.” He recommends proceeding with careful study when it comes to new work requirements.

Peter Germanis, a former Reagan staffer, argues that although work requirements may have sent an important symbolic message, the work requirements that were established under TANF were “unreasonable,” “dysfunctional,” and  “not about work.” Germanis goes on to say that “there can be no doubt that TANF work requirements are ‘broken’ and that TANF is not a model for reforming the rest of the safety net.”

Because rules prohibit the use of federal Medicaid funds to provide supportive services—like childcare, transportation, or training—that would help people find and engage in work, adding work requirements to Medicaid without investing additional state dollars in work support programs will likely only exacerbate the problems that emerged after welfare reform—all while creating new administrative burdens for the state and for its residents.

Are work requirements actually necessary to encourage Medicaid beneficiaries to get and keep jobs?

National estimates indicate that almost 80 percent of “able-bodied” non-elderly adults with Medicaid are in working families and 60 percent are working themselves. University of Michigan researchers at the Institute for Healthcare Policy and Innovation have found that most adults covered under Healthy Michigan are already working or in school.

And both studies suggest that those who aren’t working have major barriers to employment, including chronic health conditions, physical or mental health problems, or full-time caregiving responsibilities. For example, among Healthy Michigan enrollees who were out of work, one third were in poor health and three quarters reported a chronic health condition.

Randomized controlled trials, gold standard studies that use test and control groups to precisely measure the impact of a program, show that insurance coverage may actually be more effective than work requirements in helping families get and keep work. One such experiment found that Medicaid coverage reduced depression—a major barrier to employment—by almost 50 percent (though the jury is still out on whether physical health improved). Another, the RAND Health Insurance Experiment, found that less-educated people in free healthcare insurance plans were more likely to increase their participation in the labor force.

There is no question that work is important to personal dignity and that encouraging self-sufficiency—independent of state support—is a worthy goal. Michigan seems poised to move forward with a request to the federal government to amend the state’s Medicaid program to include work requirements.  

We hope this proposal carefully balances the costs and benefits of this policy change and incorporates the program components most likely to make such a requirement successful, without adding costly and unnecessary administrative costs for taxpayers and barriers to care for consumers.

Luke Shaefer is an associate professor of public policy and director of Poverty Solutions at the University of Michigan. Renuka Tipirneni is an assistant professor of internal medicine at U-M’s Institute for Healthcare Policy and Innovation. Marianne Udow-Phillips is executive director of the Center for Health Care Research and Transformation.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan. Bridge does not endorse any individual guest commentary submission. If you are interested in submitting a guest commentary, please contact Ron French. Click here for details and submission guidelines.

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