Medicaid work requirements are cruel and pointless. By Matthew Yglesias

www.slowboring.com

Medicaid work requirements are cruel and pointless

Matthew Yglesias

11 - 14 minutes

I was hoping to write a comprehensive analysis of House Republicans’ debt ceiling demands this week, but the caucus is such a clown show that I found myself running up against deadline with Kevin McCarthy still not having actually articulated those demands.

Note that the formal expiration of the statutory debt ceiling happened months ago, and we’re deep into the phase of “extraordinary measures.” Republicans decided to provoke this crisis before deciding what they are even fighting about. Then on Monday, McCarthy went to the New York Stock Exchange to give a speech in which he essentially begged Wall Street to stage a stock market crash to try to pressure the White House to come to the bargaining table. The White House line has continually been that there should be a clean debt ceiling increase, just as Trump got three times. But even if you don’t buy that, the fact is that McCarthy’s been demanding negotiations without a proposal because he’s struggling to come up with anything that can get 218 votes.

It’s exhausting to be continually writing about the gross irresponsibility of this approach, but I do think it’s important to try to retain the capacity to be shocked and outraged about it.

It’s not as dramatic as Trump sending a mob to attack the Capitol, but it reflects a similar lack of seriousness about the responsibilities of governance. There is a discretionary appropriations process through which House Republicans can press their ideas about appropriate discretionary spending levels. If Republicans want to make policy changes to regulation, they should either strike a bargain with Democrats to secure bipartisan support or else pass those changes when they hold a majority. If they’re frustrated by the fact that the filibuster makes it impossible to change regulatory policy without bipartisan support, they should join with Democratic filibuster reformers to create a better system. “We need to threaten a global financial meltdown to get the REINS Act done because the Senate votes by supermajority” is insane. Everyone involved in this should do some serious reflection as to what it is they are trying to do with their lives.

That said, one specific proposal that is unquestionably in the mix is adding work requirements to Medicaid. This is a policy worth discussing because it polls well, so Republicans will keep pushing, and I think it’s pretty bad.

In particular, I think work requirements involve a kind of sleight of hand. The pitch is that increasing labor force participation would have desirable economic impacts. We’re supposed to believe that there’s some large cadre of able-bodied potential workers loafing around and that we can mobilize them via work requirements, creating a win-win situation that actually raises their income while generating non-inflationary growth. The reality is that this makes very little logical sense, seems empirically false based on the available evidence, and unless you implement it in an unreasonably cruel way, the relevant pool of people is tiny. What you end up with instead is a proposition that’s more like “if you tell 100 people they need to jump through some hoops to keep their health insurance, only 99 of them will actually do the paperwork right, so you can save some money on the one guy.”

That is almost certainly true, but it seems like an awfully shitty way to treat the other 99 people.

It’s just very hard for me to picture a person who, if he wanted to, could get a job that paid him money but chooses not to because he enjoys leisure time and gets Medicaid anyway.

After all, while Medicaid has genuine value to its recipients, it’s not super fun or anything. There are probably some borderline cases around disability where if you kicked someone off benefits they would, in fact, be able to come up with some work. And there are certainly Medicare/Medicaid dual eligibles who might be unable to afford retirement if you cut them off from their Medicaid benefits. But all work requirement proposals that I’m aware of exempt the elderly and disabled because their proponents (to their credit, I suppose) are trying not to be cartoonishly evil.

But that’s the problem with trying to use health benefits as a supply-side intervention in the labor market: the situations in which it could plausibly work are precisely the situations in which it’s most heartless and cruel.

This is not to deny that there are aspects of our social support system that have bad supply-side effects. For example, you’d probably see more teenagers working part-time jobs if not for the fact that saving up money as a high school student costs students financial aid if they enroll in college. That strikes me as an undesirable property of the system, but to avoid it, you need to spend more money. In general, benefit phase-out cliffs seem like a serious issue to me — they deter upward mobility and probably marriage, too. The whole thing is worth taking a much harder look at. But the solution there is to make benefits more universal and have higher, flatter taxes to pay for them. The politics of that are ugly, but the supply-side benefits would be real!

We got a good empirical experiment on imposing a work requirement on non-elderly, non-disabled people in Arkansas back in 2018 and saw that “work requirements did not increase employment over eighteen months of follow-up.”

It just doesn’t make sense — nobody is sitting around living high on the hog, enjoying their free health insurance. People work because it pays money, and money is useful.

But a bunch of people did lose their health insurance.

A dream-scenario work requirement wouldn’t really save any money because everyone would just go get a job, which is good for the economy and ultimately probably good for most of the newly employed people.

The actual experience in Arkansas was the opposite, though — nobody got a job as a result of the work requirement, but thousands of people did lose coverage due to non-compliance. And to cite the same study as before, they ended up in pretty serious trouble. Fifty percent of Arkansans who lost coverage reported problems with medical debt, 56% said they delayed care because of cost, and 64% delayed taking their medications. That all sounds pretty bad to me. But unfortunately, you can’t get away with saying your political opponents are crazy and irrational all the time — if all you really care about is cutting spending, this shows that work requirements do, in fact, cut spending.

And it’s a pretty neat political trick.

Because as we all know, “cut spending” polls very well, but individual proposed spending cuts tend to poll very poorly. Work requirements, though, do poll well — I think because most people don’t like the idea of an able-bodied non-elderly person living on the public dole. Which is fair enough, I suppose, though again: if you’re imagining some horde of people getting off their asses in response to a work requirement and getting a job, you’re dreaming. What’s going to happen is some people with serious barriers to employment that would maybe qualify them for an exemption aren’t going to understand how to get the exemption and will lose their Medicaid. So Medicaid spending will be cut without anyone needing to stand up and say “what I’m saying is I want poor people to lose their health insurance so if they get sick they go broke and then get treated at public expense anyway in the emergency room.”

In my opinion, trying to cut federal spending by cutting Medicaid is really dumb.

Medicaid, for starters, is a pretty stingy program. It compensates providers at a lower rate than Medicare and at a much lower rate than private insurance. For that reason, the quality of the user experience on Medicaid is a lot worse than on other forms of insurance. But Medicaid recipients generally say they are happy with their coverage. And it fulfills the core functions of health insurance coverage: safeguarding people against financial calamity, guaranteeing access to preventative care and useful medication, and regularizing hospital compensation for meeting indigent people’s urgent needs.

Giving unemployed people access to Medicaid helps them out and does not slow the rate at which they secure new jobs. Medicaid reduces recidivism among ex-prisoners. By financing drug treatment programs, Medicaid leads to fewer assaults, thefts, and robberies. When people lose access to Medicaid, they get cut off from mental health services and crime goes up.

When kids get Medicaid, they earn higher wages and pay more taxes over the course of their lifetime.

Does it really make sense to give up on those benefits because some of those kids’ parents may not have an adequately documented work history or have put the paperwork together on a valid excuse? Do we expect the people who need mental health care and drug treatment to also be experts on keeping up with the shifting tides of Medicaid eligibility?

I think this is a weird road to go down in pursuit of fiscal savings.

It’s especially nutty because we know Republicans are fighting to increase the deficit by defunding the tax police, and they’re working to lay the groundwork for a very expensive and regressive extension of the Trump tax cuts starting in 2025. Meaning these budget cuts aren’t ultimately about reducing the deficit at all, they’re about increasing the fiscal headroom available for tax cuts for rich people.

So much of this debt ceiling standoff feels like a farcical replay of the one we saw during Barack Obama’s administration.

Chris Hayes looked at how this is playing out and said “Republicans understand better than anyone that running fiscal deficits boosts growth and austerity hurts growth. They have a completely consistent record on this: they favor large deficits under Republican presidents and huge cuts and austerity under Democratic presidents.”

But I do think it’s worth saying that the situation has changed in important ways, even though the GOP position has not. Back when Obama was president, interest rates were pinned to the zero lower bound, inflation was quiescent, and unemployment was high. Under those circumstances, austerity really was hurting the labor market and economic growth. Republicans were trying to force Obama to cut spending and Obama was trying to force Republicans to raise taxes. Obama’s hopes of achieving this via a grand bargain came to naught, but taxes did rise and spending did fall, so in some sense everyone got what they wanted. The problem is that spending cuts and tax hikes were inappropriate for the economic situation and meant we faced a years-long crawl back to full employment.

Things are different now! The unemployment rate is very low. Inflation seems to have been contained, but it’s still above the target. Interest rates are going up. A little austerity would be a pretty good idea.

Does that mean you should try to balance the budget on the backs of the poor? Or poke holes in the most threadbare parts of the safety net? Pick on the weak? Cut the cheapest health program around? No, that’s nuts. These are the times the Obama-style grand bargain was built for. If you want to cut spending in a way that minimizes harm to people, you need to look at Medicare reimbursement rates and you need to look at Social Security benefits for folks in the top half of the income spectrum. And if you’re going to touch the third rail like that, you need a balanced approach that looks at revenue options, too — ideally closing loopholes and curbing tax expenditures so that you’re draining demand out of the economy while preserving incentives to work and invest.

It drove me crazy back in 2012 that everyone who’s anyone in the American elite was talking about these ideas when they were macroeconomically inappropriate, and it’s driving me doubly crazy that so few people are talking about them now that the time is actually right.