Personal Finance
Medicaid work requirements would reduce health coverage: Senator
U.S. Senator Raphael Warnock speaks at the Capitol on April 10 in Washington, D.C.
Jemal Countess | Getty Images Entertainment | Getty Images
Republican lawmakers may be looking at substantial cuts to Medicaid in upcoming reconciliation legislation.
But one method of restricting access to coverage — work requirements — could have disastrous results for Americans, based on efforts in Arkansas and Georgia to implement such policies, according to a new report issued by Sen. Raphael Warnock, D-Ga. Those rules typically require people to meet certain thresholds, such as a set number of hours of work per month, to qualify for Medicaid coverage.
While labeled as “work requirements,” they would be more correctly called “work reporting requirements” because they involve so many rules, forms and other red tape that they can prevent working Americans from accessing coverage, according to Warnock.
“These work reporting requirements are not incentivizing work; there’s no evidence of that,” Warnock said in an interview with CNBC.com.
“What we see is that this is a good way to kick a lot of people off of their health care — hardworking everyday Americans who are struggling,” Warnock said.
A Republican House budget resolution included about $880 billion in spending cuts through 2034 from the House Energy and Commerce Committee. In a March report, the Congressional Budget Office found Republicans cannot achieve their budget goals without cutting Medicaid.
House Republicans on Sunday released draft legislative language of the reconciliation bill. Work requirements are among the eligibility policies on the table.
Based on the current proposal, 9.7 million to 14.4 million people would be at risk for losing Medicaid coverage in 2034 if they are unable to show they meet the work requirements, according to a new report from the Center on Budget and Policy Priorities.
Rep. Brett Guthrie, R-Ky., who is chairman of the House Committee on Energy and Commerce, wrote an op-ed for The Wall Street Journal in support of the work hurdles.
“When so many Americans who are truly in need rely on Medicaid for life-saving services, Washington can’t afford to undermine the program further by subsidizing capable adults who choose not to work,” Guthrie wrote in the op-ed published on Sunday.
“That’s why our bill would implement sensible work requirements,” Guthrie wrote.
Those requirements would be in line with current policies, according to Guthrie, where working adults, seniors on Medicare and veterans have all worked in exchange for health coverage eligibility.
However, Warnock argues that thinking is backwards. By providing health care coverage without those requirements, that will then help encourage people to work because they are getting the care they need to be healthy, he said.
“If you provide basic health care to the people who are eligible, you actually have more people working,” Warnock said. “You have a stronger economy.”
Expanding ‘failed experiment’ is a ‘bad idea’
Two states — Arkansas and Georgia — have tested work reporting requirements for Medicaid, with subpar results, according to Warnock’s report.
“These are two cautionary tales, and the idea of now expanding a failed experiment nationwide is a bad idea,” Warnock said.
Georgia, Warnock’s home state, is currently the only one in the country that has Medicaid work reporting requirements in place. The state’s program, Georgia Pathways to Coverage, lets adults qualify if they have 80 hours of qualifying work per month, have income below the federal poverty line and pay mandatory premiums.
The program, which was implemented on July 1, 2023, has lackluster enrollment, according to Warnock’s report. Twenty months in, the program has only enrolled around 7,000 people, while nearly 500,000 people need health care coverage in Georgia, according to Warnock.
“It gets a big fat ‘F,'” Warnock said of the program. “It’s failed.”
Georgia Gov. Brian Kemp and some other state Republicans have spoken about the program as a success.
Georgia is among the states that opted not to expand Medicaid, and therefore make coverage more accessible, following the passage of the Affordable Care Act.
Meanwhile, Arkansas did implement Medicaid expansion in 2014 and subsequently put work requirements in place from 2018 to 2019. However, those efforts failed, with 18,000 people losing Medicaid coverage in the first seven months and only a small share of people able to get coverage back the following year, according to a 2023 report from the Center on Budget and Policy Priorities.
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Low compliance with work requirements may come from a variety of factors that have nothing to do with employment, according to research from the Urban Institute. That may include limited access to the internet or transportation, health limitations or disabilities and low education levels.
Others may simply not quite meet the requirements their states have set out.
That is the case for Heather Payne, 52, of Dalton, Georgia, who suffered a series of strokes in 2022. As a result, Payne can no longer work as a traveling nurse and has opted to enroll in graduate school to become a nurse practitioner, a role that will be less physically grueling.
“I really do love nursing so much, and I cannot continue to do it the same way that I used to do it since my strokes,” Payne said.
While Payne is considered a full-time student, she is just short of the hours to qualify for Medicaid under Georgia’s work requirements. As a result, she is paying for private health care coverage with her tuition, which is adding to the debts she will have to pay off once she graduates.
Because her health insurance plan doesn’t cover all her care, she estimates she’s incurred “tens of thousands of dollars” in medical debt.
Payne, who said she is “not very savvy on politics,” attended President Joe Biden’s 2024 State of the Union Address in Washington, D.C., as Warnock’s guest in an effort to draw attention to the coverage gap.
The U.S. is one of the few industrialized countries without universal health coverage, which is “really kind of embarrassing,” Payne said.
“And instead of trying to go toward that, we’re trying to yank it away from everyone possible,” Payne said.
Rep. Jason Smith, R-Mo., speaks during a House Oversight and Accountability Committee impeachment inquiry hearing into U.S. President Joe Biden on Sept. 28, 2023.
Jonathan Ernst | Reuters
House Republicans have advanced trillions of tax breaks as part of President Donald Trump‘s economic package.
After debating the legislation overnight, the House Ways and Means Committee, which oversees tax, passed its portion of the legislation on Wednesday morning in a 26-19 party line vote.
But the battle over the deduction for state and local taxes, known as SALT, remains in limbo.
The text released Monday afternoon would raise the SALT cap to $30,000 for those with a modified adjusted gross income of $400,000 or less. But some House lawmakers still want to see a higher limit before the full House vote.
While the SALT deduction is a key priority for certain lawmakers in high-tax states, the current $10,000 cap was added to help fund the Tax Cuts and Jobs Act, or TCJA, of 2017.
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Following the vote, House Ways and Means Committee Chairman Jason Smith, R-Mo., said in a statement that Ways and Means Republicans will “continue to work closely with President Trump and our House colleagues to get the One, Big, Beautiful Bill that delivers on the President’s agenda to his desk as soon as possible.”
The full House vote could come as early as next week. But the legislation could see significant changes in the Senate, experts say.
House Republicans’ proposed tax cuts
The House Ways and Means Committee legislation includes several of Trump’s campaign priorities, including extensions of tax breaks enacted via the TCJA.
If enacted as drafted, Republicans could also deliver no tax on tips and tax-free overtime pay. But questions remain about the details of these provisions.
Rather than cutting taxes on Social Security, the plan includes an extra $4,000 deduction for older Americans, which may not fully cover Social Security income, according to some experts.
The $4,000 deduction costs $90 billion over 10 years, compared to $1 trillion for exempting Social Security income from tax, Garrett Watson, director of policy analysis at the Tax Foundation, wrote in a post on X Tuesday.
“Tax filers with no other income sources outside of Social Security would typically see little benefit, while others may see bigger gains from this idea,” he wrote in that thread.
The House Ways and Means bill also extends the maximum child tax credit of $2,000 enacted via the TCJA, and temporarily raises the tax break to $2,500 per child through 2028.
However, some policy experts have criticized the proposed credit design since lower earners typically can’t claim the full amount.
The proposed legislation “did nothing for the 17 million children that are left out of the current $2,000 credit,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, told CNBC.
Stephanie Phillips | Getty Images
“Markets go up and down, but students’ goals remain the same,” said Chris McGee, chair of the College Savings Foundation.
529 plan popularity has soared
In 2024, the number of 529 plan accounts increased to 17 million, up more than 3% percent from the year before, according to Investment Company Institute.
Total investments in 529s rose to $525 billion as of December, up 11% from a year earlier, while the average 529 plan account balance hit a record of $30,961, data from the College Savings Plans Network, a network of state-administered college savings programs, also showed.
“The industry is coming off its best year ever in terms of new inflows,” said Richard Polimeni, head of education savings at Merrill Lynch.
However, “in terms of the current market volatility, that creates some concern,” he added.
Even as concerns over college costs are driving more would-be college students to rethink their plans, college savings accounts are still as vital as ever.
Roughly 42% of students are pivoting to technical and career training or credentialing, or are opting to enroll in a local and less-expensive community college or in-state public school, according to a recent survey of 1,000 high schoolers by the College Savings Foundation. That’s up from 37% last year.
As a result of those shifting education choices, 69% of students are expecting to live at home during their studies, the highest percentage in three years.
Despite those adjustments, some recent changes have helped make 529 plans even more worthwhile: As of 2024, families can roll over unused 529 funds to the account beneficiary’s Roth individual retirement account, without triggering income taxes or penalties, so long as they meet certain requirements.
Restrictions have also loosened to allow 529 plan funds to be used for continuing education classes, apprenticeship programs and student loan payments. For grandparents, there is also a new “loophole,” which allows them to fund a grandchild’s college without impacting that student’s financial aid eligibility.
Managing 529 allocations in a volatile market
For parents worried about their account’s recent performance, Mary Morris, CEO of Commonwealth Savers, advises checking the asset allocation. “What you need to think about is assessing your risk appetite,” she said.
Generally, 529 plans offer age-based portfolios, which start off with more equity exposure early on in a child’s life and then become more conservative as college nears. By the time high school graduation is around the corner, families likely have very little invested in stocks and more in investments like bonds and cash. That can help blunt their losses.
Pay attention to your fund’s approach toward shifting from stocks to bonds, Morris said.
“If you are in a total stock portfolio, you may not want that ride,” she said: “You don’t want to get seasick.”
If the market volatility is still too much to bear, consider adjusting your allocation.
“One strategy is to start de-risking a portion of their portfolio and reallocate a portion into cash equivalent, which will provide a protection of principle while also proving a competitive return and peace of mind,” Polimeni said.
Still, financial experts strongly caution against shifting your entire 529 balance to cash. “The worst thing an investor can do in a down market is panic and sell investments prematurely and lock in losses,” Polimeni said.
Often that is the last resort. In the wake of the 2008 financial crisis, only 10% of investors liquidated their entire 529 accounts, and 20% switched to less risky assets, according to an earlier survey by higher education expert Mark Kantrowitz.
How to help 529 assets recover
For those who must make a hefty withdrawal for tuition payments now due, Polimeni suggests considering using income or savings outside the 529 to cover immediate college expenses, and requesting a reimbursement later.
You can get reimbursed from your 529 plan for any eligible out-of-pocket expenses within the same calendar year. “Using that strategy gives another six to seven months for the market to recover,” Polimeni said.
Another option is to tap a federal student loan and take a qualified distribution from the 529 plan to pay off the debt down the road. However, if you’re thinking of taking out private student loans or a personal loan that starts incurring interest immediately, you may want to spend 529 funds first in that case, and defer that borrowing until later.
Once you have a withdrawal plan, you can — and should — keep contributing to your 529, experts say. Not only can you get a tax deduction or credit for contributions, but earnings will grow on a tax-advantaged basis, whether over 18 years or just a few.
“The major advantage is the tax-deferred growth, so the longer you are invested, the more tax-deferred growth you will have,” Polimeni said.
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