Amid Court Challenges, South Carolina Adds Medicaid Work Rules for Parents With Children at Home

As work requirements for Medicaid face court challenges elsewhere, South Carolina on Thursday unveiled new work requirements for Medicaid recipients and, as one advocate described, crossed a line to become the first state to impose work reporting requirements on parents with children still at home.

While South Carolina Governor Henry McMaster touted the 2-part initiative as a way to “help all able-bodied South Carolinians participate in our booming economy,” healthcare advocates who study Medicaid say that Medicaid-eligible children will likely feel the fallout of an effort that will require parents to demonstrate proof of caregiver status to remained insured.

McMaster, a Republican, announced the waiver plan at an event in Greenville, South Carolina, with CMS Administrator Seema Verma by his side. Some observers see Verma’s promotion of Medicaid work rules in the face of court challenges as a key to her political survival in her feud with HHS Secretary Alex Azar.

“South Carolina’s economy is booming, wages are up, and our unemployment rate is at an all-time low at 2.6%,” McMaster said in a statement. “Competition for workers is fierce and businesses are struggling to fill vacancies. In this economy there is no excuse for the able-bodied not to be working.”

The approved section 1115 Medicaid demonstration waivers include the following:

Palmetto Pathways to Independence Initiative. Under the South Carolina plan, Medicaid coverage would extend up to the federal poverty line (FPL), or about $24,540 for a family of 3, not to the full Medicaid expansion population envisioned under the Affordable Care Act (ACA). Previously, the state only covered parents up to 67% of the FPL, or about 1 million of its 5 million residents.

Healthy Connections Community Engagement Initiative. Medicaid beneficiaries would have to work or volunteer for 80 hours per month unless they have a qualified exemption, such as pregnancy, a disability, or being enrolled in a treatment program for alcohol or substance abuse. Being a primary caregiver can qualify, but unlike rules in other states that made this an automatic exemption, parents have to apply for exemption and have it approved.

The waivers begin immediately and last through November 30, 2024.

Joan Alker, of the Georgetown Center for Children and Families, wrote Thursday in a blog post that these reporting requirements have been shown to drive down participation in Medicaid in Arkansas, where 18,000 people lost coverage before a federal judge put the plan on hold in March.

“Children are not exempt from harm’s way when their parents’ coverage is put on the chopping block — for many reasons,” Alker wrote. “First and foremost, when parents are uninsured, their children are much more likely to be uninsured as well. There may be considerable confusion about this new policy — and parents may assume that the whole family will lose coverage and not even apply.

“Second when a parent becomes uninsured, the economic security of the entire family is put at risk by the potential medical debt and even bankruptcy that can ensue. And finally, uninsured parents are at greater risk of having untreated medical conditions, such as depression, which can inhibit parent child bonding especially in those crucial first years. All of this is bad news for children.”

Similar plans for Kentucky and New Hampshire have also been blocked in court, while Arizona, Indiana, Michigan, Ohio, Wisconsin, and Utah have plans on hold. Lawsuits have been filed in Michigan and Indiana—where Verma worked as a consultant under then-Governor, now Vice President Mike Pence.

Kentucky’s new governor, Andy Beshear, has vowed to restore the novel Medicaid expansion program created by his father, former Governor Steve Beshear, while a change of power in the Virginia legislature will mean the end of work rules there.

Besides the lack of evidence that work rules for a health insurance program serve to lift low-income Americans out of poverty, the reporting apparatus is expensive: A report from the Government Accountability Office found that it cost $410 million to install programs in 5 states.

In addition, CMS did not approve South Carolina’s request to pay for subsidies on the ACA exchanges for residents who lose Medicaid when they find work—and exceed income requirements—but are not offered healthcare coverage through their jobs.

Alker described the CMS approach as a “bait and switch.” Work rules were designed to entice the holdout “red states” to expand Medicaid and blunt the political fallout of some poor being left behind, but lawmakers there have used the waiver process to layer on new requirements for very poor residents already eligible for Medicaid; the Deep South states in particular had some of the leanest benefits in the country.

“CMS has been at this crossroads for some time,” she wrote. “Five more non-expansion states have work reporting waiver applications pending (Alabama, Mississippi, Oklahoma, Tennessee and South Dakota). [The] approval provides a road map for those states if they wish to use a similar ‘bait and switch’ maneuver and modify their requests to couple an expansion for parents with a punitive work requirement.”