Since its establishment in 1965, the federal government and the states have jointly administered Medicaid.  The program’s characteristics and logistics vary from state to state, and there is always some give-and-take between the states and the feds.  States want more flexibility; the federal government wants to make sure states are complying with the law.  One thing that has never been permitted is for a state to implement a work requirement for certain Medicaid beneficiaries.  That unwise tradition, however, appears to be changing. 

The Trump administration has announced that it will give states the option of requiring work for some Medicaid beneficiaries, such as able-bodied adults.  This is a significant development that will have positive effects throughout the country and will yield several positive results. 

First, although Medicaid was originally designed for the poor, it has been expanded to include non-elderly childless adults who could work.  Nothing alleviates poverty like a job.  Especially now, with robust job growth, each person moving into the working world after spending time unemployed or out of the labor force entirely provides numerous positive externalities to society as a whole. 

Second, it is likely that some Medicaid beneficiaries, as they begin working, will move to better employer-provided health insurance coverage, conserving scarce Medicaid resources for those who most need help.  Those who have employer-sponsored health insurance coverage experience better healthcare outcomes than those on Medicaid. 

Third, a work requirement for some Medicaid beneficiaries will encourage policymakers to implement a similar demand for other federal and state social programs, moving even more people to employment. 

Lastly, the requirement will be flexible.  States might choose, for example, to allow community service to be substituted for paid work as part of this requirement, and society benefits when individuals engage in charitable activity. 

States that choose to establish a work requirement for some of their Medicaid beneficiaries will be able to compare their results with those of other states that choose not to implement a work requirement.  When states innovate and compete amongst themselves, promising ideas develop in ways that the federal government cannot replicate.

This decision by the Center for Medicare and Medicaid Services (CMS) may bring interesting dynamics to states that are debating Medicaid expansion under Obamacare.  Voters in the state of Maine imprudently voted on November 7, 2017 to expand the program.  Governor Paul Le Page (R) has pointed out that funding for this expansion was not approved in the vote and that the cost is estimated to be 63 million dollars in Fiscal Year 2019 .  But one way to make the decision more palatable and help pay for the expansion would be to implement a work requirement for certain beneficiaries, since it would generate growth and increase tax revenue.  As CMS Director Seema Verma says, “meaningful work is essential to beneficiaries’ economic self-sufficiency, self-esteem, well-being, and health of Americans.” 

The election results in Virginia also make expansion in that state more likely.  A potential vote on Medicaid expansion next year in Utah represents another opportunity to add a work requirement.  Whether or not states decide to expand the program, adding a work requirement will help strengthen Medicaid and preserve its original mission, which was to provide a safety net to children, the disabled, and seniors living in poverty.