Will Michigan’s Medicaid work bill fill jobs or save money? No one knows

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

Mitch and Julie Bray are self-employed entrepreneurs.

The couple, who live in Ypsilanti, made custom furniture before their daughter, Sawyer, was born. Today, Julie makes her living as a weaver and Mitch designs and builds textile machines. They don’t earn a lot of money. Their jobs revolve, for now, around family and homeschooling Sawyer, who is 7.

Mitch receives health insurance from the federal government because he’s a Marine Corps veteran, but he said his coverage doesn’t extend to his wife and daughter, who have been covered under Medicaid since 2017.

So the Brays are concerned about legislation that passed the Michigan Senate this month to impose work requirements on residents who receive health care through Medicaid, the federal government’s health insurance program for low-income people.

Work requirements for people seeking welfare assistance have been around since the 1990s. But this is the first time such requirements can be imposed as a condition of receiving government health care.

Related: Where Michigan governor candidates stand on Medicaid work requirements
Opinion: Beware of unintended consequences of Michigan Medicaid work demand

As Michigan’s GOP-controlled Legislature moves toward passing the work-for-healthcare measure, critics contend it’s doing so without answers to some basic questions: How many people would be subjected to the new work rules? How much would the program cost the state to manage? And how much money might Michigan expect to save in the long run?

“They passed legislation in the Senate without actually knowing what the numbers are and how many people would be affected,” said Gilda Jacobs, president and CEO of the Michigan League for Public Policy, which advocates on behalf of vulnerable residents. “And that’s almost criminal, to be honest with you.”

Jacobs contends the bill — introduced by Sen. Mike Shirkey, R-Clarklake — is motivated in an election year by an unsupported belief that thousands of able-bodied poor people are willing to accept government handouts without bothering to look for a job.

“This is not a major problem that we have in our state that has to be addressed,” Jacobs said. “This is driven purely ideologically.”

The measure is also opposed by Democratic lawmakers and and is also drawing criticism from the state’s Republican governor, Rick Snyder, at least in its current form.

Shirkey defends the measure by first noting that asking able-bodied people to work in return for government assistance is not a new idea. He told Bridge he has favored such a policy for years for Medicaid enrollees, but it simply was not possible until now. Medicaid recipients can meet the bill’s demands by undertaking job training or an internship, in addition to employment, according to the bill.

It used to be employers’ biggest problems were taxes and regulations, Shirkey said. Today, it’s finding enough talent to fill Michigan jobs, even those requiring fewer skills.

“The Legislature has an obligation to, on a regular basis, review statutes, policies, rules, whatever, that may unintentionally contribute to the restriction of our continued economic recovery,” Shirkey said. “This is one of those.”

A new day

The Trump administration opened the door to such bills this year. Since Medicaid was signed into law in the 1960s, no state has been allowed to require recipients to work for health benefits. The Trump administration in January loosened guidelines to let states apply for a waiver from their Medicaid requirements to impose such laws.

So far, three states — Kentucky, Indiana and Arkansas — have had their applications approved, though Kentucky’s is now being challenged in court. Another seven states have pending waivers with the Centers for Medicare and Medicaid Services.

At least some experts say Michigan’s bill, as written, would in some ways be tougher than what other states have done — chiefly, because Michigan would require more hours of work than other states, and more hours than are required for other safety net programs like food assistance.

Shirkey’s bill would require Medicaid recipients to work, on average, 29 hours per week. Proponents note that work requirements already exist for food assistance recipients in Michigan. But those rules call for an average of 20 hours per week, though Shirkey told Bridge he expects the hourly requirement to be reduced as the bill moves through the state House.

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Judging the measure’s impact, should it become law, is proving tougher.

The state Department of Health and Human Services is still working to determine how many people would be subject to the bill’s work rules, according to spokeswoman Lynn Sutfin, who told Bridge: “I do not have an ETA on that data.”

Meanwhile, the nonpartisan Senate Fiscal Agency, citing the lack of data from other states, essentially threw up its hands in its analysis of the bill, writing that “it is not possible to provide anything approaching a precise estimate of costs and savings.”

Experts aren’t the only ones wondering about the bill’s impact.

The Brays say they have questions that, so far, don’t have answers. For instance: How would self-employed people, who work flexible schedules, track and report their hours? Would they be at risk of losing health insurance if their hours fluctuate based on work or seasonal demands?

“I feel like it’s based on a traditional viewpoint of what a working person looks like, you know?” Julie Bray said of Senate Bill 897, which awaits a hearing in a House committee.

“You get in your car, you drive to an office, you spend a certain number of hours there and then you come home,” she said. “But there are so many other ways that people work.”

Rising costs for a Healthy Michigan

Despite the lack of firm data, the Senate voted 26-11 this month to advance the bill, mostly along party lines. (Only one Republican senator, Margaret O’Brien of Portage, voted with Democrats in opposing the bill.)

To supporters, primarily conservative lawmakers and business groups, the legislation is a necessary fix to shore up a government healthcare program they say is becoming fiscally unsustainable, as it traps recipients in a cycle of state welfare dependence.

Shirkey, as it happens, voted for Michigan Medicaid expansion in 2013, known as the Healthy Michigan Plan, despite what he said was a philosophical opposition to doing so. He said in committee that he still believes that vote was the right decision at the time, but the program has gotten too big and lawmakers are obligated to preserve resources for people most in need of the benefits.

His bill now calling for a work requirement is “not an indictment of Medicaid, and it’s not an indictment of Healthy Michigan,” Shirkey said at a Senate committee hearing in March. “But it is a challenge to how we implement it.”

Shirkey said his bill dovetails with a $100 million talent initiative that Snyder proposed to help Michigan fill roughly 800,000 positions over the next six years. (Said Snyder spokesman Ari Adler: “The senator's attempt to connect his bill to the ‘Marshall Plan’ is admirable, but we do not see as direct a correlation as he does.”)

Snyder stopped short of saying he’d veto the bill if it arrived on his desk as written, but in a statement he called the Senate version “neither a reasonable nor responsible change to the state’s social safety net.”

Snyder has championed the Medicaid expansion program he signed into law in 2013 under a provision of the federal Affordable Care Act. Healthy Michigan has extended coverage to nearly 690,000 Michigan adults who previously didn’t qualify for benefits. (Close to 2.5 million people receive Medicaid benefits in Michigan, per DHHS data.)

Snyder has called Michigan’s program a potential national model for its approach to cost-sharing and encouraging participants to adopt healthy behaviors.

Its passage was spurred in part by support from the business community. Yet the state’s largest business voice, the Michigan Chamber of Commerce, now contends that business support for Healthy Michigan will “collapse” if reforms like adding work requirements are not added. The health care program is both overenrolled and underfunded, chamber president and CEO Rich Studley testified before a Senate committee.

The chamber says it is concerned that Medicaid is eating a larger share of the state budget each year.

Traditional Medicaid and the Healthy Michigan expansion program cost the state about $17.6 billion in the fiscal year that ended Sept. 30, 2017, according to the state budget office. The bulk of Medicaid funding comes from the federal government, though the state spent about $3.6 billion last year on both traditional and expanded Medicaid from general fund and other state discretionary dollars — that’s up about 7 percent from the nearly $3.4 billion in state spending in 2014 (5.6 percent when adjusted for inflation).

Yet the budget office also estimates Medicaid expansion created $328.6 million in general fund savings last year, up from $199.2 million in 2014. A provision in the Healthy Michigan law says that when general fund costs exceed savings, the program can be discontinued. The nonpartisan House Fiscal Agency in January estimated the program will remain in the black through at least 2020, even as the state’s required match toward its Medicaid expansion program increases to $400 million by 2021.

To critics of the work requirement, which includes groups representing health care providers, Shirkey’s bill is a cold-hearted attack on poor people that could take away a crucial support — health care — they say is critical to helping people find or hold onto a job.

Michigan, Jacobs said, is “at the bottom in terms of education. Our infrastructure is still crumbling, despite the new money that’s going in there. I think if you talk to the average person on the street — ‘What do you want to do? Kick poor people off of health care? Take health care away from them? Or fix the roads?’”

Who are the people not working?

The Michigan Chamber has pointed to Census data analyzed by the right-leaning Foundation for Government Accountability suggesting that half of Michigan’s Medicaid expansion enrollees don’t work.

That statistic is backed up by a 2016 survey — released last year — of more than 4,000 Healthy Michigan adult recipients by the University of Michigan’s Institute for Healthcare Policy and Innovation, which found that roughly 49 percent of respondents were employed. It also noted, however, that a large percentage of unemployed people had some kind of health condition or disability that prevented them from working.

Shirkey, using the finding that half of adult Medicaid expansion enrollees are unemployed, estimates between 300,000 and 350,000 people could be required to find work under his bill.

But those numbers have some significant caveats.

Shirkey’s bill includes numerous exemptions, including, among others: a caretaker of a child younger than 6; a student whose parents qualify for Medicaid or who is legally emancipated; people who receive long-term disability benefits; pregnant women; and people considered medically frail or who have medical conditions that impede work. People who live in counties with an unemployment rate of at least 8.5 percent would be allowed to count their job search toward the work rules.

The Senate Fiscal Agency said in its analysis that nearly 1 million Medicaid recipients could be subject to the work rules — nearly 700,000 Healthy Michigan recipients and another 300,000 people who receive federal Temporary Assistance to Needy Families benefits.

But because of the exemptions carved into the bill, analysts wrote, that figure “should be considered to be a maximum well in excess of the actual number of people who would be subject to the work requirement.”

This month, the left-leaning Center on Budget and Policy Priorities noted that Kentucky estimated its proposal could lead to a 15 percent reduction in adult Medicaid recipients. A similar cut in Michigan could equate to roughly 150,000 people, according to the author, Jesse Cross-Call, a senior policy analyst with the center.

University of Michigan researchers found that while close to 51 percent of the Healthy Michigan enrollees surveyed weren’t working, many of them were in poor health or had other physical or mental conditions that served as barriers to work.

Of the 11 percent who reported that they can’t work, for instance, nearly three in four said they had fair or poor health, roughly seven in 10 had a physical impairment and nearly half had a mental condition.

“What this implied to us was that it seems like from these findings most people who can work are already working, and those groups that are not currently working clearly have a lot of health conditions or impairments that likely prevent them from being able to work,” said Renuka Tipirneni, an assistant professor of internal medicine at U-M’s Institute for Healthcare Policy and Innovation.

“We’re not sure how much bang for your buck you’re going to get from the work requirement,” she added.

Opinion: Beware of unintended consequences of Michigan Medicaid work demand

That’s not the chamber’s takeaway from the numbers.

“We fundamentally and philosophically disagree,” said Wendy Block, senior director of health policy, human resources and business advocacy for the Michigan Chamber.

“For us, it isn’t about how many. It’s about helping people find a path to independence and help our members fill the workplace shortages that they have,” Block said. “If it’s 10,000 workers, that is helpful to the business community.”

How to calculate savings to state

The Senate Fiscal Agency estimated that state costs to implement the rules would range from $20 million to $30 million annually from the general fund, while savings were undetermined.

Among the unknown factors in trying to estimate any cost savings to the state are the share of Medicaid recipients who lose coverage because they didn’t meet the work rules, and the share of recipients who earned enough in extra income that they no longer qualified for Medicaid, analysts wrote.

Cross-Call, of the Center on Budget and Policy Priorities, said it’s possible that uncompensated care at hospitals — which has declined in Michigan since Healthy Michigan began — would again increase if people lose health coverage and go back to seeking medical care in emergency room visits. Hospitals often write off the costs of care provided to patients who can’t pay the bills, costs that can be spread throughout the system.

“People who lose their Medicaid coverage don’t go into employer-sponsored insurance, or don’t go into the (Affordable Care Act) marketplace,” he told Bridge. “We’re talking about people who work in restaurants, or work as a landscaper, or work in a tourism industry — essentially, industries that don’t offer coverage.”

And, he noted, if the bill’s minimum weekly work hours remain at 29, on average, workers could be punished if they work in jobs with fluctuating schedules.

As written, the bill could prevent people who lose coverage for not meeting requirements from receiving Medicaid benefits for a year. There are temporary exemptions written into the bill, however, to account for such things as family emergencies or life-changing events.

Critics note that the bill also doesn’t provide increased funding for child care or transportation, both of which help support working adults and might be in greater need if work hours increase, said Jacobs, of the Michigan League.

Separate data from University of Michigan researchers found that Healthy Michigan enrollees whose health improved were more likely to say that having Medicaid health benefits helped them perform better at work, improve their ability to look for work or land a better job.

“Medicaid was never meant to be a workforce development program. And I think that’s really what people really need to understand,” Jacobs said. “To me, it just kind of goes into the dehumanization of low-income people in our state. It just kind of feeds into a negative stereotype that, as the data show, just doesn’t exist.”

The Brays, of Ypsilanti, have heard the stereotype.

The couple said they earned about $18,000 last year, in large part because Mitch Bray spent much of the year developing a new textile tool that the couple hopes will pay off with more sales. A good year is $100,000 in sales, he said.

Mitch and Julie Bray say they split working hours depending on who is caring for their homeschooled daughter, and have chosen to make sacrifices to have their own businesses and prioritize their family.

“They’re trying to paint Medicaid recipients as lazy and out to take advantage of the system and don’t have any sort of work ethic or drive,” Mitch Bray said.

“I really appreciate that there’s this system in place that will allow us to not be concerned about health care coverage, and I really value that system, but the stigma behind it is just incorrect,” he said. “I don’t think we should play politics with people’s lives.”