U.S. states are racing to overhaul aging computer systems to meet new Medicaid work mandates set to take effect Jan. 1, a task projected to cost taxpayers more than $1 billion but which could save over a hundred-times more.
The new eligibility requirements, part of a broader push to reduce government spending, will require millions of lower-income adults to prove they are working, volunteering, or enrolled in school for at least 80 hours per month. However, the administrative infrastructure required to track this data is largely nonexistent in most states.
While the federal government has begun distributing an initial $200 million to assist with the transition, an analysis by the Associated Press of budget projections in more than 25 states indicates the total tab for technology upgrades and additional staffing will likely exceed $1 billion.
State officials describe the upgrades as a massive technical challenge. Toi Wilde, chief information officer for Missouri’s Department of Social Services, noted that existing eligibility systems are “pretty old” and that making customized changes is “very, very difficult.” Unlike a standard software update, states must often hire private contractors to integrate complex databases for verifying employment and education.
The fiscal impact varies by state. Arizona estimates a $65 million cost and the need for 150 new employees, while Colorado and Kentucky project spending of $51 million and $46 million, respectively. Missouri is currently fast-tracking a $32 million appropriation to solicit vendor bids.
Critics point to Georgia, the only state currently operating such a mandate, where administrative costs reached $54 million—double the amount of medical assistance actually paid out to participants.
The Congressional Budget Office projects the new mandates will result in 6 million fewer people having health insurance. States face federal penalties for payment errors starting in 2029, adding further pressure to ensure the systems are functional by the January deadline.
But while some in the health industry are complaining about the extra admin and its cost, the administration insists that the savings will massively outweigh the costs to get the system operative.
The Congressional Budget Office (CBO) estimated that able-bodied work requirements for Medicaid benefits would save taxpayers $109 billion over the next decade.
A 2023 Axios-Ipsos survey revealed that 63% of Americans supported work requirements for Medicaid and Supplemental Nutritional Assistance Program benefits.