In January, Kentucky governor Matthew Bevin announced changes to the state’s Medicaid program. Relying on newly granted flexibility from the Trump administration, the Bluegrass State would now require, among other things, that childless, able-bodied adults work or engage in some other productive activity in order to receive Medicaid benefits. Within days, a coalition of liberal activist groups, including the dubious Southern Poverty Law Center, filed a class action lawsuit to block Bevin’s Medicaid reforms.

While the lawsuit focuses entirely on the alleged harm that would befall Kentucky residents as a result of the new program, neither Governor Bevin nor any other Kentucky official is named as a defendant. Rather, the groups are suing only federal officials—ensuring their access to the Obama-packed D.C. Circuit courts—on the unusual theory that the federal government violated its own statutes and the Constitution by granting Kentucky too much regulatory freedom. In February, Governor Bevin filed a rival lawsuit in Kentucky federal court, seeking a declaration that his Medicaid plan is legal. Both lawsuits are proceeding along separate tracks.

The stakes in this legal battle are high. The rising cost of Medicaid is creating fiscal emergencies across the United States, eating up a quarter of state budgets nationwide, and crowding out spending on other priorities, like education and infrastructure. If states are not empowered to rein in these costs, it will strike a mortal blow to the system of cooperative federalism on which federal aid programs are based.

The controversy began in January 2018 when the federal Center for Medicare and Medicaid Services (CMS) announced that states could seek waivers from Medicaid rules in order to require “community engagement”—a term that encompasses not only working but also looking for work, taking classes, and getting substance-abuse treatment, among other activities. Pregnant women, the elderly, and the disabled would all be exempt from these requirements. Four states, including Kentucky, have already received community-engagement waivers, and seven other states have pending applications. The state waiver applications vary but generally require 20 hours of community engagement per week.

Mainstream media and liberal pressure groups have declared war on the waiver program—invariably focusing only on work requirements, rather than the broader concept of community engagement. An essay in the New York Times argues that the imposition of “harsh” work requirements would be catastrophic, causing “severe harm” to the poor. But the authors go on to argue that the requirements would be largely ineffective because most Medicaid recipients already work.

In fact, the immediate impact of the community-engagement waivers is likely to be modest. According to a recent study by the Kaiser Family Foundation, among non-elderly adults covered by Medicaid, 60 percent are already working, and nearly 80 percent live in a household with at least one worker. Many of the remaining individuals are disabled and, therefore, not subject to the new requirements. But for the rest—able-bodied, childless adults with no job—there’s no particular reason why the government cannot try to nudge them away from dependency. Community engagement represents an incremental step toward the long-term goal of bringing Medicaid back to its original design: a temporary safety net for the truly vulnerable, not a permanent entitlement.

The more pernicious argument advanced by the plaintiffs in the Kentucky lawsuit—and echoed by various pressure groups—is that community-engagement requirements are “categorically outside the scope” of the government’s waiver authority precisely because they might succeed in reducing Medicaid enrollment. On this reading, state flexibility under Medicaid is a one-way ratchet: states can innovate all they want—provided their goal is to expand coverage.

In fact, the law requires only that waivers advance the “objectives” of Medicaid, which include services that help poor families achieve “independence or self-care,” according to the law’s language. Ultimately, Medicaid’s goal ought to be good health outcomes, not maximum enrollment. Even before the Trump administration, CMS guidelines allowed waiver programs that sought to “improve health outcomes” or “increase the efficiency” of the program. Under those guidelines, the Obama administration permitted states to introduce financial incentives for the poor to engage in “healthy behaviors,” a term which includes cutting back on tobacco or alcohol, exercising, eating better, or losing weight.

Isn’t getting a job at least as good for you as eating a salad? Activists in the U.S. are trying to cast doubt on the proposition, but there is mounting evidence—some of it cited in CMS’s January announcement—that working and community engagement lead to better health. A study commissioned by the British government a few years ago found “strong evidence” that unemployment is bad for you, while working is good for both mental and physical health. Even sick and disabled people, according to the study, should continue working to the extent possible. It’s significant that a country like Britain, which picks up the tab for all health care, is keen to promote the health benefits of work.

And yet, the opponents of community engagement insist that such programs must not even be attempted. What are they afraid of? Medicaid waivers are time-limited, state-by-state experiments. If work requirements prove to be harmful or ineffective, states will soon lose interest. But if they promote good outcomes, they are likely to spur reforms at the state and federal level. In the battle over Medicaid work requirements, it’s the flexibility of a federalist system that is really under attack.

Kentucky governor Matt Bevin with President Trump (Photo by Mark Wilson/Getty Images)


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