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When Michigan policymakers decided to expand Medicaid under “Healthy Michigan” in 2013, the state predicted that a total of 475,000 able-bodied, working-age adults would be added to the beneficiary rolls. Today, that number has ballooned to more than 670,000. Coupled with the 2 million individuals on the traditional rolls, the program now covers more than 40 percent of all births across the state and the health care costs of one in four Michiganders. These trends are alarming, as are the associated burdens shouldered by taxpayers, but lawmakers have an opportunity to relieve the stress on this safety net and also provide the workers needed for Michigan’s rebounding job market.
Michigan spends approximately $4,300 per adult enrolled in Medicaid, funded through over $4 billion from state tax revenue — slightly over $2 billion of which comes directly from taxpayers through the General Fund. The federal government picks up the tab for 71 percent of the state’s Medicaid costs and funds 95 percent of Healthy Michigan. But the federal funding for Healthy Michigan enrollees is scheduled to continue going down from the original 100 percent to 90 percent and possibly lower after 2020.
In 2018, then-Gov. Rick Snyder signed legislation permitting the state to ask the federal government for permission — under something called a Section 1115 waiver — to implement work and community engagement requirements for the able-bodied population on Medicaid. Just before Gov. Gretchen Whitmer took office in January, the federal Centers for Medicare and Medicaid Services approved the waiver, setting the stage for legislators and the new administration to get the requirements ready for 2020. When the waiver legislation was passed, House and Senate fiscal analysts estimated that these requirements could save state taxpayers $25 million to $45 million annually. While this represents a good first step toward reigning in Healthy Michigan’s out-of-control spending, the requirements’ potential positive influence upon the state’s workforce may prove to be even more important.
We can look at both federal and state experiences with similar changes to see how the new requirements could shift labor and spending dynamics in Michigan. Following President Bill Clinton’s 1996 reform that imposed work requirements upon able-bodied adults on federal welfare, caseloads fell dramatically. They are now 56 percent lower than they were 20 years ago. As reported by a Heritage Foundation study on this reform, welfare dependency significantly decreased and the nation experienced a corresponding boom in employment, particularly for single mothers who had been on welfare. Approximately 50 percent of the never-married women returned to the workforce or entered it for the first time. Over 66 percent of single women who dropped out of high school found jobs and left the rolls. Most dramatically, nearly 100 percent of mothers ages 18-24 left welfare to find employment. Subsequently, over 1.6 million children were lifted out of poverty. The portion of black children who were living with a single mother on welfare declined from almost 42 percent to 30 percent in just six years following the landmark reforms.
Tennessee’s experience in Medicaid reform in 2005 tells another powerful story. Facing unsustainable costs for the state’s mounting Medicaid rolls, then-Gov. Phil Bredesen made the difficult political decision to kick 250,000 able-bodied adults off the program. Rather than languishing in an abyss of lost coverage, over 65 percent of these individuals entered the job market. Of those who found employment, over 90 percent received employer-sponsored health benefits for themselves and their families.
Michigan taxpayers and employers should be encouraged by the possibility that we can follow a similar trajectory that restores the dignity of work for thousands of people across our state. From 2010 to 2018, Michigan has added a half-million jobs with wages that are now higher than the national average when adjusted for cost-of-living. Yet, of those currently enrolled in the Medicaid program, nearly 34 percent — or approximately 228,000 — are working-age, childless, and able‑bodied.
As Michigan policymakers prepare work and community engagement requirements this year, they do so at a time when our job market is strong and diversifying. And there are a number of ways one can satisfy these requirements — which mandate a minimum of 80 hours per month — and benefit our communities. They include:
Whether Gov. Whitmer is committed to working with lawmakers and state agencies to administer these reasonable requirements is an open question. The Mackinac Center worked with lawmakers and coalition partners to advance these reforms under the Snyder administration last summer, and it also corresponded with staff at the federal departments of Labor, and Health and Human Services. We hope to continue this work with the new administration in Lansing.
