Obamacare’s Medicaid Expansion Could Cause 2.6 Million Able-Bodied Adults To Drop Out Of Labor Force

February 24, 2015

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Source: Forbes

One of the biggest myths pushed in statehouses across the country is that Obamacare’s Medicaid expansion will be an engine of economic growth. The Obama administration promises that more than 350,000 jobs would be created nationwide in 2015 if all states opted into Obamacare expansion.

But the truth is that expanding Medicaid to able-bodied adults will discourage work, create massive new welfare cliffs and ultimately shrink the economy, not grow it. A new report by the Foundation for Government Accountability outlines how Obamacare expansion could affect the labor force.

Obamacare Expansion Discourages Work

Obamacare’s perverse design discourages work by creating a massive new welfare cliff for able-bodied adults. In states that expand Medicaid under Obamacare, single adults moving above 138 percent FPL would face premiums, deductibles, copays, coinsurance and other out-of-pocket costs nearly $2,000 higher (on average) than those they were subject to under Medicaid.

The massive new welfare cliff created by Obamacare’s Medicaid expansion is sure to discourage employment. Research shows that expanding Medicaid to this new population will discourage work, depress earnings, reduce labor-force participation and hurt the economy.

A comprehensive study released by the National Bureau of Economic Research, for example, found that past Medicaid expansions to enroll able-bodied, childless adults reduced the likelihood of working by up to 10 percentage points. This means Obamacare’s Medicaid expansion could cause up to 2.6 million Americans to drop out of the labor force entirely.

The Congressional Budget Office confirms that Obamacare will discourage work and cause millions of working-age adults to drop out of the labor force or reduce their hours, ultimately reducing economic output. Indeed, there is strong evidence of that happening after previous Medicaid expansions to able-bodied adults in Arizona, Iowa, Maine, Maryland, Michigan, New Mexico, New York, Pennsylvania, Tennessee, Utah, Washington, D.C. and Wisconsin.

Obama Administration Says No To Work Requirements

Some states have tried to put window dressing on Obamacare expansion plans by requesting permission to require the Medicaid expansion population fulfill work requirements. The Obama administration has rejected every single one of these requests. In fact, even watered down “work search” and “work effort” provisions have been flatly denied.

Despite these fruitless negotiations, other pro-expansion governors have expressed interest in covering their Obamacare expansion plans in a veneer of work requirements. But even if states were able to secure approval from the Obama administration to impose work requirements, Medicaid expansion is still not worth the price.

Work Requirements For Existing Medicaid Enrollees

Rather than negotiate with President Obama over expanding Medicaid to more able-bodied adults, states should instead look to incorporate work into their existing Medicaid programs.

States could consider tying performance bonuses for Medicaid managed care organizations to employment activities, or incorporating work activities into enhanced benefit rewards for enrollees. They should also be urging Congress to allow states to build on the successful state-led bi-partisan welfare reform of the 1990s that incorporated meaningful work requirements proven to move people out of government dependency and into self-sufficiency.

Hope On The Horizon?

With a new Republican majority in Congress, states may soon have the opportunity to incorporate work requirements into Medicaid. Congressman Bruce Westerman (R-AR), a member of the House Budget Committee, has introduced legislation to give states more flexibility to impose work requirements in Medicaid. House Budget Chairman Paul Ryan (R-WI) has proposed consolidating several federal welfare programs and incorporating work requirements for those who are receiving benefits.

Federal law already allows states to enforce work requirements for individuals receiving both cash assistance and Medicaid. If an adult receiving cash assistance under the Temporary Assistance for Needy Families (TANF) refuses to work, states can terminate eligibility not just for TANF, but for Medicaid as well. A number of ideas being floated on Capitol Hill would give states additional flexibility to extend those work requirements for other adults.

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