Arizona Joins ‘Tidal Wave’ of Medicaid Work Requirement Requests

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By Brenna Goth

Arizona’s mandate to add work requirements for Medicaid recipients may have a better chance of approval the second time around, as federal officials signal receptivity to the idea across the country.

The state’s Medicaid agency, known as the Arizona Health Care Cost Containment System (AHCCCS), plans again this month to request permission to add employment parameters for “able-bodied adults” receiving coverage. The AHCCCS must attempt to implement the rules every year under a law passed by the Arizona Legislature in 2015, a few years after the state approved Medicaid expansion.

But while the Centers for Medicare & Medicaid Services rejected the state’s request last year, CMS Administrator Seema Verma has said in public comments and a letter to governors that she will encourage programs that promote employment. Policy experts predict support for the work requirement proposals pending in a handful of states and swift litigation by opponents if they’re approved.

Ten states have or are about to submit work requirement plans under Medicaid Section 1115 demonstration waivers requests, said Olivia Pham, who is tracking them as a research associate at the Georgetown University McCourt School of Public Policy’s Center for Children and Families. The waivers allow states to operate outside federal Medicaid requirements.

A request by Kentucky will likely be the first to receive approval with a decision expected by the end of the year, Pham told Bloomberg Law. Other pending waivers could quickly follow.

“We expect a tidal wave,” she said.

No Estimate on Arizona Impact

Arizona’s work requirements would target adults between the ages of 19 and 55, according to a November letter from the AHCCCS Director Thomas Betlach.

The state will submit by Dec. 31 a waiver request that would require adults who are physically and mentally capable, and not too medically frail to work, to attend school or go to employment support and development programs for at least 20 hours a week, the letter said. Community service would count in some cases.

A host of exemptions include American Indians, people with serious mental illness, domestic violence victims, people who are homeless, and a number of other populations. Those who fall under the requirements would have six months to meet them before losing coverage, though they could re-enroll after complying.

People who must follow the work requirements but don’t meet them would be limited to five years of benefits in their lifetimes.

Arizona has yet to determine how many people would be impacted by the proposed rules, Heidi Capriotti, spokeswoman for the AHCCCS, told Bloomberg Law. Nationwide, a study by the Kaiser Family Foundation found about 60 percent of nonelderly adults on Medicaid work.

One challenge in Arizona is tracking who would be exempted from the rules, Capriotti said. The AHCCCS doesn’t have data on victims of domestic violence, for example.

“These are some new initiatives on our part,” Capriotti said.

The state is also considering other proposals to move away from “rigid and outdated federal prescriptions,” such as eliminating some prescription drugs from coverage and limiting nonemergency medical transport for able-bodied adults, Betlach said in his letter.

The state will develop more detailed plans and collect feedback on those concepts over the next year, Capriotti said.

Worth the Investment?

Arizona’s work requirement proposal drew more than 500 public comments, Capriotti said. Requests throughout the country are drawing similar debates.

Arizona groups from university centers to health-care associations have raised questions over how the state would define “able bodied” and questioned the potential of burdensome reporting requirements.

“Is it worth this tremendous investment, bureaucracy and red tape?” asked Siman Qaasim, director of health policy for the Children’s Action Alliance, which advocates for Arizona children. The rules also don’t create new economic opportunities, Qaasim told Bloomberg Law.

Nationwide, some experts said states don’t have the authority to add the new parameters. Medicaid isn’t a cash-assistance program and has never included work as an eligibility requirement, said Andy Schneider, research professor at the Georgetown University McCourt School of Public Policy who worked as a senior adviser at the Centers for Medicare & Medicaid Services under the Obama administration.

There’s the risk of lawsuits as Verma and the Trump administration operate under “quite a different idea” of the statute, he said.

“I’m not the only lawyer who doesn’t think she has the authority to do this,” Schneider told Bloomberg Law.

But supporters of Medicaid reforms see opportunity with the new leadership. The Foundation for Government Accountability, which advocates to reduce government dependency, argues employment requirements help states free up resources for needier populations and provide an economic benefit by getting people back to work.

The foundation expects more states to follow suit if the first waiver is approved as expected.

“We’ll see a lot of other dominoes fall,” Research Director Nicholas Horton told Bloomberg Law.

Arizona, Massachusetts Seek Drug Exclusions

Arizona, though, is unique in its consideration to exclude some drugs from coverage based on their cost effectiveness. The AHCCCS recently outlined addressing rising prescription drug costs with more flexibility in covering breakthrough drugs.

A drug exclusion request is also pending in Massachusetts. Arizona is starting its discussion and won’t submit the idea in this month’s waiver, Capriotti said.

The proposals “kind of break new ground,” said Andrea Callow, associate director of Medicaid Initiatives at Families USA, which advocates for an affordable health-care system. States are pinched by rising drug costs but must weigh saving money with providing the medicines people need, she told Bloomberg Law.

“They’re going to have a hard time doing that in a thoughtful way,” Callow said.

And basing coverage on cost effectiveness has its own challenges, said Charles Phelps, a retired professor and provost emeritus at the University of Rochester who studies the economics of health care.Phelps was a member of the study committee for a recent report by the National Academies of Sciences, Engineering, and Medicine that recommended federal negotiation of drug prices as a way to address rising costs. It also suggested allowing the exclusion of some drugs from coverage under the Medicaid Drug Rebate Program.

But states suggesting cost effectiveness as a measure of what to cover will “continue to bump into political trouble,” Phelps told Bloomberg Law. Some widely-used drugs have had no cost-effectiveness study, while that figure can vary depending on the research, he said.

To contact the reporter on this story: Brenna Goth in Phoenix at bgoth@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

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