By Naomi Lopez Bauman

While some lawmakers and media talking heads are portraying the newly released federal guidance for the Medicaid program as draconian, its impact will be quite limited. Nevertheless, allowing states to adopt work and community engagement activity requirements for the narrow Medicaid population of able-bodied, working-age adults is an important step forward in modernizing the decades-old program and restoring integrity for the taxpayers who are footing the bill for these benefits.

Medicaid was originally established to provide needed healthcare services to the most vulnerable. Today, it has morphed and expanded, now covering 1 in 6 Americans and anywhere from one-quarter to two-thirds of all births, depending on the state. Medicaid accounts for more than one-quarter of state budgets, including federal funds, and is now squeezing out spending on other important state priorities such as education and transportation.

The Social Security law allows for states to seek permission to modify statutory requirements of the program through the waiver process. According to a guidance letter from the Center for Medicare & Medicaid Services (CMS) to state Medicaid directors, states will have the opportunity to pursue work and community engagement activities under an 1115 waiver demonstration project. The guidance establishes that states may impose work requirements for able-bodied adults. This refers to individuals who are non-elderly, non-pregnant adults, and who are not in the program based on a disability.

So far, at least ten states are now seeking 1115 waiver authority to impose work and community engagement participation as a requirement for continued Medicaid eligibility and several more are in the process of preparing to do so.

According to a note in the newly released guidance:

“States will have the flexibility to identify activities, other than employment, which promote health and wellness, and which will meet the states’ requirements for continued Medicaid eligibility. These activities include, but are not limited to, community service, caregiving, education, job training, and substance use disorder treatment.”

There are approximately 25 million non-elderly, non-disabled adults receiving Medicaid benefits at any given time. Of those, about 60 percent are currently working. But given the many activities that qualify as work and community engagement, the majority of the remaining 10 million who are not currently working are either already engaged in a qualifying activity or would not be required to do so.

Even though the impact of this guidance will be limited, it is important because it is the first time in almost a decade that an administration is openly encouraging state Medicaid innovation and reform. In particular, this guidance recognizes the need for flexibility both for states and work/community engagement activities in order to move Medicaid closer to what it was originally conceived to be—a safety net for the truly needy, not a trap for the able-bodied.

State flexibility to pursue work and community engagement activities in their respective Medicaid programs is, hopefully, the first of many steps that will allow—and encourage—states to re-imagine Medicaid to reflect and meet their own state’s needs.