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Medicaid work rules another test for Gov. Gretchen Whitmer and Republicans

Doctor and male patient

Democratic Gov. Gretchen Whitmer has signaled since taking office that she wants to renegotiate a controversial law that will impose work requirements on some Michigan Medicaid recipients for them to keep health benefits starting next year.

Republican Senate Majority Leader Mike Shirkey says there’s no reason to change the work law he helped to pass last year.

How the two leaders settle those differences may foretell whether politically divided government will produce results in Lansing, as leaders on both sides have promised, or lead to more gridlock on this and other contentious issues, such as environmental regulations and road funding.

Whitmer hasn’t yet elaborated on what changes she plans to seek from the Republican-majority Legislature, whose leaders — Shirkey and House Speaker Lee Chatfield — sponsored work requirements legislation; Shirkey’s version was signed into law last term by a Republican governor.

But her concerns appear to focus on problems raised in a Bridge Magazine story last year showing how a law passed in Arkansas resulted in thousands of poor people losing Medicaid eligibility because they had trouble complying with that state’s complicated reporting requirements.

Related: From Arkansas, a warning to Michigan on Medicaid work rules
Related: Will Michigan’s Medicaid work bill fill jobs or save money? No one knows​

Representatives for the two Republicans told Bridge that Whitmer has not yet raised her ideas for revising work requirements for Healthy Michigan Plan recipients, as Michigan’s Medicaid expansion program is known. But she extended an olive branch their way in both a letter to the federal government and in her inaugural State of the State address, saying that any changes she would pursue would continue to encourage work as well as protect health coverage.

“We must encourage personal productivity and fight fraud effectively, without undermining the health or the finances of hard-working Michiganders,” she wrote the federal Centers for Medicare & Medicaid Services, which approved Michigan’s work requirements in December.

Shirkey told reporters last week he is “a little disappointed in her approach,” adding that he wants the work requirements to go into effect next year as currently written.

Shirkey is one in a minority of Republicans who voted to expand Medicaid in 2013, despite what he said were philosophical objections. He told Bridge he advocated for the work requirements last year because he said Healthy Michigan has grown too large and fiscally unsustainable. The new rules also are intended to help people find jobs at a time when talent attraction is one of employers’ biggest challenges.

He also pushed back on suggestions that Michigan’s law would repeat the mistakes made in Arkansas. Arkansas implemented work requirements in a way “I decided we shouldn’t — quickly,” Shirkey told Bridge. He said the reason he wanted to allow more than a year before the requirements took effect was so the state Department of Health and Human Services would have time to implement them.

The chaos in Arkansas, Shirkey said, “isn’t because people are choosing to not work. It’s because they’re finding the system cumbersome. So shame on us — shame on us — if we don’t really study and learn their system and make sure we don’t make the (same) mistakes.”

In December, the Legislature awarded DHHS $1.5 million for a partial year of funding related to implementation of the Medicaid work requirements. The department estimates ongoing costs, including for 54 positions, will be close to $33 million. Legislators also awarded $13.5 million in one-time money to DHHS to update information technology systems to support the Healthy Michigan Plan work requirements.

Whitmer has said she is nevertheless concerned about the prospect that thousands of low-income Michigan residents who receive health coverage under the Healthy Michigan Plan could lose their benefits for failing to comply with the new rules.

Critics of state work rules have said Medicaid was never designed to be a workforce program before the Trump administration last year allowed states to create work requirements.

In her letter to the federal government, Whitmer cited a new report from Manatt Health, the legal and consulting health care group of Los Angeles-based professional services firm Manatt, Phelps & Phillips LLP, that estimated between 61,000 and 183,000 Healthy Michigan recipients could lose their Medicaid benefits over a year. That projection is based on the experience of Arkansas, where more than 12,000 people — and more than 18,000 in 2018, Manatt wrote, citing state government data — lost coverage after work requirements took effect.

“Work requirements are new to Medicaid, but Arkansas’s experience provides valuable insight into how such requirements may affect coverage in other states,” the report states. “This analysis, based on a review of Arkansas and Michigan data with adjustments for differences and similarities between the states, projects large coverage losses in Michigan that result from the challenge of identifying people who the state has sought to exempt or who have met the conditions of the work requirement.”

DHHS spokeswoman Lynn Sutfin said the department is reviewing Manatt Health’s analysis and its own data and will make its own projections about the number of recipients who could lose Medicaid coverage for lack of compliance.

Whitmer cited her concerns with the work rules on the 2018 campaign trail, where she highlighted her role in helping to pass bipartisan Medicaid expansion in Michigan as a Democratic state senator.

Shirkey said he is skeptical of Manatt Health’s projections of coverage losses in Michigan based on what happened in Arkansas because Arkansas implemented its program differently and Michigan’s program has not yet started.

“It’s a heavy lift for sure,” said Emily Schwarzkopf, a senior policy analyst and specialist in healthcare with the Michigan League for Public Policy. How the politicians handle the politics of the issue will be critical.

“She wants to promote work and she wants to ensure people have coverage, so if they can agree on some shared goals — maybe Governor Whitmer doesn’t get everything she wants and Senator Shirkey doesn’t get everything he wants — but there can be some compromise.”

Shirkey said he would be open to discussing with the governor ways to mitigate the “cliff” — related to people who will earn too much through work to qualify for Medicaid benefits but whose employers don’t provide health insurance.

“We should celebrate the fact that they’ve exceeded the (income) limit, but if they’re in a job that doesn’t provide health care, what can we do creatively?” he said.

Marianne Udow-Phillips, executive director of the Center for Healthcare Research & Transformation at the University of Michigan, said data from Arkansas offers real-world examples and data about potential negative outcomes that weren’t available when the legislation was passed last year.

“I do believe — I totally, sincerely believe — that nobody wants Michigan to look like Arkansas,” Udow-Phillips said of policymakers from both parties. “I don’t think that’s what the drafters had in mind. I don’t think they want to see people losing coverage because of (a) lack of compliance for paperwork issues.”

Health policy researchers and analysts who have studied Medicaid work requirements in Michigan and in other states say there are ways Michigan could adjust its rules or implementation to reduce the magnitude of potential coverage losses, both through administrative actions within the Department of Health and Human Services and through legislation.

Lowering the age limit of eligible participants

Michigan’s work requirements will apply to Healthy Michigan recipients between the ages of 19 and 62. A handful of states, including Arkansas, have limited the age to 50 or younger, which excludes more Medicaid recipients from being required to comply.

Udow-Phillips said work requirements already in place for Michiganders who receive food assistance benefits apply to people ages 18 to 49, and aligning the age limits for Medicaid work rules “would also simplify things administratively” while recognizing that it can be more difficult for older workers to find employment.

Shirkey told Bridge he would not be open to lowering the age limit from 62 because many people work longer and retire later than in years past. The age limit for food assistance work requirements is set by the federal government, he said, and is not something the state Legislature can change on its own.

Removing barriers to work for low-income people

One of the criticisms of Michigan’s Medicaid work requirements is that policymakers didn’t also increase funding for job supports such as child care, transportation or training.

Researchers at the Michigan Association of United Ways, in a statewide study focused on the financial barriers the working poor face, have found that they are often unable to afford basic needs such as child care, housing and transportation.

“Maybe can we devote some funding toward programs that can help people (with) more money for job training or transportation or child care,” said Schwarzkopf, adding that those are issues everyone in the workforce has to face. “It’d be interesting to see what the legislative leaders and the governor would be open to talking about.”

Offer Medicaid recipients flexibility in how they report work hours

State administrators could use other data on file about Medicaid recipients’ employment to confirm they’re working, including automated matching of employment records, tax filings and withholdings, Udow-Phillips said.

“This would actually save on staffing because it would reduce the administrative burden,” she said, “but it would require some technology.”

The state Department of Health and Human Services has said it is considering allowing recipients to report their work hours using an online system used for other public assistance programs, by phone or through caseworkers.

Sutfin, the DHHS spokeswoman, told Bridge the department will allow recipients to use online and telephone systems to report work hours.

The funding approved in December will allow the department to develop a reporting system and hire more staff to implement the work requirements, including in training, compliance, policy and operations, she said.

Including a telephone reporting option is a good idea, said April Grady, a director with Manatt Health. So would enlisting the help of community groups or individuals who could be trained to help Healthy Michigan Plan recipients navigate the system.

Another option is to change the law’s requirement that recipients report their work hours every month or risk losing benefits due to noncompliance, Grady said. Instead, the state could adopt a presumption of work that would prevent people from needing to report their hours monthly; rather, they could notify the state of any changes to their work status, or at longer intervals.

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