Last month, the U.S. House of Representatives passed a budget reconciliation package that includes hundreds of billions in dollars to cuts in Medicaid that are projected to leave millions of Americans without health insurance. The majority of these cuts will come from more stringent work requirements mandating that Medicaid recipients either work, volunteer, or be enrolled in school for at least 80 hours a month. Legislation proposed in the Senate would expand the requirement to teenagers and make even more cuts to Medicaid.
While this is promoted as an effort to eliminate waste, it is important to note that the majority of Americans enrolled in Medicaid are already working. However, if you are an adult in Bradshaw, WV, or New Orleans Ninth Ward and you suddenly lose your job, you cannot immediately enroll in courses at a community college or begin volunteering at a nonprofit. Even on the off-chance that those opportunities are available, it may still be logistically and financially impossible for you to do so. At the state level, Medicaid work requirements have also historically led to unintended disenrollments. For example, Georgia last year denied nearly percent of applicants because they reported less than the required 80 hours per month or did not sufficiently verify their hours.
The truth is that Main Streets and communities across the country, especially underserved ones, rely on the stability of the consistent healthcare coverage that Medicaid provides. If these cuts and work requirements go into effect, here are five ways that it could negatively impact small businesses and their employees.
1. Threat to Coverage for Working Low-Income Employees
A recent survey of small businesses found that nearly three in five have owners, employees, or family members who rely on Medicaid or CHIP coverage. Many workers in small businesses are already meeting these proposed work requirement thresholds, but their hours fluctuate, especially in the retail and hospitality sectors. Some – including U.S. citizens – may not have proper documentation to verify work, especially gig, cash-based, or shift workers. That being said, even if they are working and their hours dip or they miss a month reporting them, they could still lose coverage. More employees becoming uninsured would ultimately lead to worse health outcomes and higher absenteeism, not only hurting small businesses, but communities as well.
“If Congress cuts funding for Medicaid benefits, Missouri workers and their children will lose their health care. And hospitals will close. It’s that simple. And that pattern will be replicated in states across the country,” Senator Josh Hawley [R-MO]
recently wrote in an op-ed in The New York Times.
2. Administrative Burdens and Red Tape
While there has been so much talk around government efficiency as of late, work requirements can be even more bureaucratic and usually involve complex reporting systems. Many small business workers may not have digital access or face language barriers when missing paperwork or tech errors can result in automatic loss of coverage. This means small businesses may see more turnover or have to step in to assist with compliance even if they do not have the capacity to do so.
3. Reduced Workforce Participation
Losing Medicaid could make it harder to stay healthy or afford to work—especially in physically demanding jobs. Because of this, caregivers, older workers, and people with chronic illnesses may find it hard to meet these more rigid work requirements and just choose to stay on Medicaid without working. That same survey found that 43% of small business owners predict higher employee turnover. This will shrink the available labor pool and make it harder for small businesses to hire and retain talent.
4. Increased Costs for Small Businesses
When employees lose Medicaid, they may skip needed care and show up sick or not at all. Some workers may ask their employers to step in with health coverage or unexpected healthcare costs, which will either be very expensive or unaffordable, leaving them in a lose-lose situation. Most small business owners are already bracing for this, as the survey found that more than half said they would face new pressure to provide employee healthcare coverage, directly hitting their bottom line.
5. Disproportionate Impact on Rural and Underserved Areas
Many businesses in rural areas or marginalized communities rely on Medicaid to keep their staff and customers healthy. The proposed work requirements could strip coverage from people in areas that have less job opportunities, where their only means of transportation is their car.
Medicaid work requirements may seem like a way to encourage employment, but in practice, they could harm the very workforce small businesses rely on and disrupt the morale of their communities and local economies. There are a number of legislative steps ahead before these cuts would become law and it would be worth lawmakers time to see how they would truly impact Main Streets in their districts.
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