House Republicans passed a debt limit bill last month that included provisions expanding work requirements for cash welfare and food stamps while extending such requirements to Medicaid health coverage. While President Biden recently suggested an openness to some expansion of work requirements, negotiations on the scope of a potential debt limit package continue.
But conservatives need not confine themselves to whatever provisions Biden will accept. (He has suggested he would oppose work requirements in Medicaid). Even as federal lawmakers seek to expand work requirements in Congress, states have an obvious solution staring them in the face.
If state legislators seek to expand work requirements, they could accomplish their goal by exiting Obamacare’s expansion of Medicaid to the able-bodied. Doing so would promote work in ways that would save states money, without necessitating the administrative expense associated with enforcing an official work requirement.
A De Facto Work Requirement
The 2010 health care law included a categorical expansion of Medicaid eligibility to all those with incomes under 138 percent of the federal poverty level, or $41,400 for a family of four. While Obamacare initially required all states to expand Medicaid, the Supreme Court in 2012 made expansion a voluntary proposition.
Because most recipients of expansion were able-bodied adults — nearly 5 in 6 of whom lack dependents, according to a 2012 Urban Institute study — some conservative states declined to accept the expansion. But because Obamacare prohibits most individuals with incomes below the poverty level from receiving federal insurance subsidies, some people in non-expansion states did not qualify for either Medicaid or subsidized Exchange coverage.
The left calls this phenomenon, whereby some low-income individuals do not receive subsidized insurance, the “coverage gap.” But it also amounts to a de facto work requirement in non-expansion states, because individuals can stay out of the “coverage gap” by working enough to earn income above the federal poverty level, thereby qualifying for subsidized Exchange coverage.
Logical Transition Away from Medicaid Expansion
Two developments in recent years should make this option more appealing to states that have heretofore embraced Medicaid expansion. First, the tight labor market, and accompanying wage gains for low-income workers, should make it easier for individuals to earn income above the poverty level that would qualify them for Exchange subsidies. In 2023, the federal poverty level stands at $1,215 per month for a single individual. At the current federal minimum wage of $7.25 per hour, an individual would need to work 168 hours, or roughly 40-42 hours per week, to exceed the poverty level and qualify for Exchange subsidies.
But consider that, at an hourly wage of $10 per hour, that same individual would need to work 121 hours per month, or roughly 30 hours per week, to earn enough income to reach the Exchange subsidy threshold. And if a business pays $15 per hour, that individual worker would need to work only 81 hours per month to qualify for Exchange subsidies — nearly equal to the 80-hour-per-month work requirement to receive Medicaid coverage under the House-passed debt limit bill.
Second, the expanded subsidies that Democrats enacted in their 2021 “stimulus” bill — and extended through 2025 in the Inflation Reduction Act — mean that low-income recipients would not face any out-of-pocket premium to purchase benchmark coverage through the insurance Exchanges. Unlike Medicaid expansion, these Exchange subsidies would not cost states one penny, although they would transfer more costs onto the federal balancing sheet.
Conservative lawmakers in states that expanded Medicaid should view an exit from expansion as the simplest way to impose work requirements for taxpayer-subsidized health coverage. If states exit expansion, current Medicaid recipients willing to work 20-30 hours per week could likely qualify for subsidized Exchange coverage comparable to their existing Medicaid benefits. Through such a change, conservative state lawmakers could bolster the actions of their federal counterparts in Congress in moving away from a culture of dependency and returning to a culture of work.