Series 14: State Implementation of Medicaid Work Requirements
Elkhart County, Indiana, builds roughly 80% of the recreational vehicles sold in America. When the RV market is strong, the county’s unemployment rate drops below 2% and temporary staffing agencies run double shifts to meet demand. When orders fall, as they do cyclically in every recession and several times between them, layoffs cascade through the supply chain and unemployment can spike past 15% within months. A worker who logged 180 hours in March might report zero in June, not because she stopped trying to find work, but because the industry that employs her town evaporated overnight.
Three hundred miles south, in Terre Haute, Dana Simons runs the Next Step Foundation, where 14 peer recovery coaches, themselves recovering from addiction, serve roughly 100 Hoosiers battling substance use disorders. Every one of her clients is enrolled in the Healthy Indiana Plan. Every one of her staff members depends on it. When Senate Bill 2 moved through the legislature in early 2025, Simons told lawmakers that she understood the impulse to tighten eligibility. But she also warned that her clients already face work and volunteering requirements as a condition of their recovery programs, and that layering Medicaid verification on top of treatment compliance creates “one more layer where things can go wrong.” Her small farming communities around Terre Haute are decimated by methamphetamine, not opioids, and for the people she serves, losing health coverage does not mean losing insurance. It means losing access to the treatment keeping them alive.
Indiana enters the OBBBA era with a distinctive asset and a distinctive contradiction. The state has more experience with Medicaid conditionality than any other expansion state. The Healthy Indiana Plan’s POWER accounts have required monthly contributions from members since 2015. The Gateway to Work program received CMS approval in 2018. Senate Bill 2 was signed by Governor Mike Braun in May 2025. And yet, for all this preparation, Indiana has never actually enforced work requirements on a single enrollee. The state has practiced conditionality extensively but implemented work verification not at all.
The Gateway That Never Opened#
Indiana’s Gateway to Work program was approved by CMS in February 2018, making it one of the first states authorized to require community engagement. The design reflected what its architects considered lessons from the HIP 2.0 experience: graduated implementation by age group (ages 40 to 59 first, then 20 to 39), multiple qualifying activities including employment, education, volunteering, and caregiving, and a referral pathway to workforce development services before any sanctions applied. The 20-hour weekly threshold aligned with the standard that would later become federal law.
When Gateway to Work launched on January 1, 2019, the state billed it as a community engagement opportunity rather than an enforcement mechanism. Then-FSSA Secretary Jennifer Walthall described it as “actually more about connecting people with things they haven’t been connected with before.” The state identified more than 200 partner organizations, including WorkOne employment centers, to help members find jobs or volunteer placements. But skepticism ran deep. Maurice Young, an advocate for people experiencing homelessness in Indianapolis who handed out bagged lunches at the Central Library every Wednesday while helping people navigate HIP coverage, questioned whether the infrastructure existed to serve people whose daily reality involved finding shelter, not filing compliance paperwork.
It did not matter. Federal courts vacated the Arkansas and Kentucky waivers in March 2019, creating legal uncertainty that led Indiana to pause. The COVID-19 pandemic in March 2020 triggered continuous enrollment, and Gateway to Work remained in suspension. The Biden administration revoked Indiana’s work requirement authorization in June 2021, with CMS Director Chiquita Brooks-LaSure writing that the requirements did not promote Medicaid’s statutory objectives and would cause substantial coverage loss.
The result is that Indiana designed a work requirement system, received federal approval, built administrative infrastructure for tracking, partnered with more than 200 community organizations, and then watched that infrastructure sit idle for seven years. Whether this represents preparation or merely planning is the question that SB 2 and the OBBBA will answer.
POWER Accounts: The Conditionality Rehearsal#
What Indiana does have is a decade of experience with a different kind of conditionality. HIP 2.0’s POWER (Personal Wellness and Responsibility) accounts require monthly contributions ranging from $1 to $27 depending on income. Non-payment triggers consequences: members above poverty face lockout from coverage, while members below poverty shift to a State Plan benefit package that eliminates dental, vision, and chiropractic coverage and imposes copayments for all services.
The POWER account data is instructive. Approximately 80 to 85% of members make payments consistently. The 15 to 20% who do not tend to be members with chronic conditions, lower incomes, and less stable circumstances, precisely the population most likely to face work verification challenges as well. Research published in the New England Journal of Medicine documented that lockouts occurred disproportionately among the most medically vulnerable. Simons at the Next Step Foundation compared the problems her clients experienced with premium payments to what she expected from work reporting: the system works well for people whose lives are stable, and fails predictably for people whose lives are not.
FSSA Secretary Mitch Roob, who launched the original HIP program under Governor Mitch Daniels and returned to lead the agency under Governor Braun, has positioned POWER accounts as proof of concept for conditionality. The state knows how to track monthly member compliance, manage non-payment consequences, and process reinstatements. But work verification differs fundamentally from premium collection. Verifying whether someone paid $15 is a binary data check against a payment processor. Verifying whether someone worked 80 hours across multiple part-time jobs, or volunteered at a food bank, or participated in qualifying education, requires documentation from external sources, employer cooperation, and activity categorization that premium tracking never demanded.
The Data War#
The legislative debate over SB 2 produced a sharp clash between competing narratives about who HIP serves and whether those people work. The Foundation for Government Accountability’s Jonathan Ingram testified that “most able-bodied adults on HIP today do not work at all,” citing a 2020 Lewin Group report that found approximately 48% of HIP enrollees, roughly 273,000 people, had zero reported earned income in 2018. The framing was designed to support the welfare-to-work rationale: if half of enrollees are not working, work requirements would push them toward employment.
KFF data told a different story. Among adult Medicaid beneficiaries in Indiana aged 19 to 64 and considered able to work, roughly 47% were employed full-time and another 27% worked part-time. The remaining 26% who were not working included caregivers with medically complex children or elderly parents at home, people too ill or disabled to work, and Hoosiers attending school. KFF further detailed that 52% of working Hoosiers on Medicaid were employed in agriculture or the service industry and another 21% in manufacturing.
The gap between these narratives matters enormously for predicting work requirement outcomes. If Ingram’s framing is correct and nearly half of enrollees have zero income, then work requirements will either push a large population toward employment or strip coverage from hundreds of thousands. If KFF’s analysis is correct and roughly three-quarters of the target population already works or qualifies for exemptions, then work requirements function primarily as a documentation burden on people who are already doing what the policy demands.
The Lewin Group data and the KFF data are not necessarily contradictory. Zero reported earned income in administrative records does not mean zero economic activity. It can mean informal employment, unreported self-employment, gig work that generates 1099 income not captured in wage databases, or caregiving that produces no income at all. The distinction between “not working” and “not appearing in wage databases” is precisely the verification gap that will determine coverage outcomes.
SB 2 and the Federal Collision#
Senate Bill 2 moved through the Indiana legislature in early 2025 amid sharp debate. The original bill included not only work requirements but an enrollment cap of 500,000, a 36-month lifetime eligibility limit, and presumptive eligibility restrictions that would have fundamentally changed how hospitals serve uninsured patients. The bill also codified a Medicaid advertising ban prohibiting state agencies and FSSA contractors from marketing the program.
The enrollment cap drew the most immediate pushback. With more than 680,000 Hoosiers on HIP, capping at 500,000 would have required removing at least 180,000 people from coverage. The House committee removed the cap on an 8-4 party-line vote in March, responding to testimony from dozens of Medicaid recipients and healthcare providers. Susan Brackney, a full-time freelance writer from Columbus with rheumatoid arthritis and treatment-resistant depression, told the committee she wanted legislators to know she was “not a deadbeat,” and that without HIP she would not be alive to testify.
The lifetime eligibility limit was also struck. The presumptive eligibility restrictions survived in modified form. SB 2 created a three-strikes policy for hospitals: any patient granted presumptive eligibility who was later determined ineligible counted as a violation, and three violations within 12 months disqualified the hospital from making future presumptive eligibility determinations. Tim Kennedy, general counsel for the Indiana Hospital Association, warned the committee that patients often arrive at hospitals with nothing that could be used for income verification, and that hospital staff using their best judgment would inevitably make determinations that did not survive full evaluation. The IHA was not opposed to standards, Kennedy said, but a strict three-strikes threshold “could easily result in many hospitals no longer being able to do your presumptive requirements.” A separate provision banning self-attestation for eligibility determination, Kennedy warned, would “effectively nullify most presumptive eligibility programs.”
The work requirements survived. SB 2 requires able-bodied adults to work, volunteer, or participate in work programs for 20 hours per week to maintain eligibility, with over a dozen exemptions including disability, pregnancy, caregiving, substance use treatment, and student status. Governor Braun signed the bill on May 1, 2025.
Then the OBBBA reshaped the landscape. The federal law mandates work requirements for all expansion states by January 2027, making Indiana’s state-level authorization redundant in some respects but also creating alignment problems. Indiana’s SB 2 anticipated CMS waiver approval as a prerequisite; the OBBBA made work requirements mandatory regardless. Indiana had planned for a July 2026 start date, but CMS indicated the state could not implement work requirements before the 2027 federal effective date, pushing Indiana’s timeline back six months.
The delay frustrated state officials who had invested political capital in early implementation. Roob told the State Budget Committee in September 2025 that his framing was revealing: the Governor “believes in work requirements; he doesn’t believe in work requirements to kick people off of the program. He believes that Medicaid ought to be a program that incentivizes individuals to work, not disincentivizes them to do so.” Other elements of HIP 3.0, including cost-sharing requirements and wellness incentives, remained under CMS review.
The Fiscal Pressure Cooker#
Indiana’s work requirement debate is inseparable from a broader fiscal crisis surrounding HIP financing that makes the state’s position fundamentally different from any other expansion state. HIP is funded entirely outside Indiana’s general fund. The federal government covers 90% of expansion costs. The state’s 10% share comes entirely from the Hospital Assessment Fee, a provider tax on hospitals, and cigarette taxes. No state general fund dollars support HIP, a structure that has insulated the program from budget competition but created a funding model dependent on two fragile revenue streams.
The OBBBA’s provider tax restrictions threaten this model directly. Indiana taxes hospitals at 6% and leverages the resulting federal reimbursement to fund its HIP obligation. The new federal law would cap provider taxes at 3.5%, potentially halving what Indiana can collect. Roob was racing in mid-2025 to secure CMS approval for a managed care assessment fee, a new tax on insurance companies projected to raise $865 million for HIP, before the federal law took effect and potentially prohibited it. He described the situation as a “five-alarm fire,” noting that without the Hospital Assessment Fees, the state could not afford HIP at its current scale. CMS indicated the new tax would take approximately a year to review, a timeline that effectively ran out the clock.
The fiscal pressure compounds against a bleak revenue backdrop. Indiana’s revenue forecast projected $2 billion less in state coffers over the next two years, and Medicaid had grown from $2.1 billion in 2017 to nearly $5 billion projected in 2027. Costs for Applied Behavior Analysis therapy for autistic children and PathWays attendant care for seniors over 60 were rising independently. Federally Qualified Health Center costs had nearly doubled from under $300 million in fiscal year 2021 to roughly $500 million, with Roob noting that one center cost the state $600 per visit.
The interaction between fiscal pressure and work requirements creates perverse incentives. The bill’s own fiscal note acknowledged that Indiana would collect less in hospital assessment fees as a result of fewer people being enrolled in HIP. Disenrolling members through work requirement verification failures reduces the denominator that justifies provider tax revenue, potentially accelerating the fiscal crisis that work requirements were ostensibly designed to address. Indiana would have fewer dollars and fewer members, but the members who remain would be more medically complex and more expensive to serve, as work requirements disproportionately remove healthier members who face documentation rather than health barriers.
The MCO Landscape#
Indiana contracts with four Managed Care Entities to administer HIP: Anthem Blue Cross and Blue Shield (approximately 21% of total Medicaid managed care enrollment), Managed Health Services (a Centene subsidiary), CareSource, and MDwise, the only locally based nonprofit in the group. MDwise holds roughly 8% of enrollment; CareSource approximately 10%. Together these four organizations manage the care of more than 650,000 HIP members and will bear primary operational responsibility for work requirement verification support.
The MCO role in Indiana’s work requirement infrastructure is more extensive than in most states because of the POWER account precedent. MCOs already track monthly member compliance, process payments, manage lockouts and reinstatements, and coordinate care around coverage disruptions. Adding work requirement tracking to this existing conditionality infrastructure is operationally logical but creates compounding administrative burden. A care coordinator at Anthem or CareSource will need to monitor both POWER account status and work verification status for the same member, flagging when either or both create coverage risk.
The Robert Wood Johnson Foundation calculated Indiana’s cost per HIP enrollee at $667, dividing the state’s $491 million expense by 737,000 enrollees covered in 2024. This is among the lowest per-enrollee costs in the nation, reflecting both the relatively healthy expansion population and the POWER account structure that shifts some cost-sharing to members. Work requirement administration will increase per-member administrative costs while potentially reducing the enrolled population, pushing that ratio in an unfavorable direction.
Georgia’s experience haunted the legislative debate. Medicaid advocate Tracey Hutchings-Goetz told the House committee that Georgia, the only state with functioning work requirements at the time, had reportedly spent 80% of its dedicated implementation funds on administration and consulting fees while enrolling fewer than 6,000 people. North Carolina, she noted, had enrolled more than 600,000 through clean expansion in the same timeframe. The comparison was imprecise, since Georgia’s partial expansion differs structurally from Indiana’s HIP, but the administrative cost warning resonated.
Compounding Conditionality#
Indiana is poised to become the first state where expansion adults face simultaneous conditionality requirements across multiple dimensions. Under HIP 3.0 as proposed, members would need to make POWER account contributions monthly, meet work activity thresholds verified semi-annually, and navigate eligibility redeterminations that Roob told lawmakers FSSA had already begun implementing quarterly for approximately 47% of Medicaid-eligible individuals.
The compounding risk is real and quantifiable. A member who misses a POWER account payment and simultaneously faces work verification for the first time confronts two compliance deadlines with different documentation requirements, different consequence timelines, and potentially different appeal mechanisms. The 15 to 20% POWER non-payment rate provides a floor estimate for work verification non-compliance: if the simplest possible conditionality requirement produces this failure rate, the more complex requirement will almost certainly produce higher rates.
Indiana’s unwinding experience offers a preview. When the state resumed normal eligibility redeterminations after the pandemic continuous enrollment period ended in April 2023, more than 401,000 people were disenrolled from Indiana Medicaid by January 2024. The state used enrollees’ originally scheduled renewal dates rather than prioritizing certain populations, and the procedural churn was enormous. Adding work verification to a system still absorbing the administrative aftershocks of unwinding multiplies the processing demands on an already strained eligibility infrastructure.
The frequency of state contact with members will increase dramatically under HIP 3.0. Monthly POWER account interactions, semi-annual work verification, and quarterly eligibility reviews create six to sixteen administrative touchpoints per year per member. Each touchpoint is both an opportunity for navigation and support and an opportunity for procedural failure to result in coverage loss. For members whose lives are stable, this is manageable paperwork. For members juggling addiction recovery, cyclical unemployment, unstable housing, or caregiving responsibilities, each touchpoint is a potential cliff.
The Three Indianas#
Indiana’s implementation challenges vary sharply across its geography. The Indianapolis metro area, home to roughly 35% of the expansion population, has concentrated workforce development infrastructure, multiple MCOs with established care coordination capacity, and a diversified economy. WorkOne centers are accessible. Employers are numerous and varied. Implementation there, while complex, operates in an environment of available resources.
Northwestern Indiana, centered on Gary, Hammond, and East Chicago, represents post-industrial America in its starkest form. Steel mills that once employed tens of thousands have left behind communities with high poverty, limited employer bases, and health burdens from decades of environmental contamination. The expansion population here is disproportionately Black, reflecting the region’s demographic history, and faces labor markets where available work is often temporary, part-time, and without benefits. Verifying 80 monthly hours of qualifying activity requires employers, educational institutions, or volunteer organizations willing to generate documentation. In communities where the formal economy has contracted, the documentation infrastructure has contracted with it.
Southern Indiana shares characteristics with Kentucky’s Appalachian counties: rural poverty, limited transportation, substance use disorders, and healthcare provider shortages. The Appalachian-adjacent counties along the Ohio River represent the same implementation environment that challenges Kentucky and West Virginia, where monthly hour requirements collide with structural economic barriers that no verification system can overcome. Simons’ description of small farming communities around Terre Haute “decimated by drugs” applies across a wide swath of southern Indiana where methamphetamine, not opioids, drives the treatment population and where the peer recovery coaches who serve that population are themselves HIP enrollees.
Northern Indiana adds another layer: an estimated 60,000 Amish residents in communities concentrated around Elkhart, LaGrange, and Adams counties. Most Amish do not participate in Medicaid, exercising religious exemptions from government benefit programs that date to the 1960s. But those who do face verification challenges because their employment and economic activity often occur entirely outside systems that generate administrative data. No wage records, no W-2s, no unemployment insurance contributions. The Amish community’s own healthcare financing system, built around church aid funds and benefit auctions that can raise $300,000 in a single evening, represents an alternative model of mutual obligation that operates entirely outside the framework work requirements assume.
What Indiana Reveals#
Indiana’s significance in the work requirements landscape lies in the gap between its accumulated experience and the challenge ahead. No other expansion state has spent a decade operating conditionality requirements. No other state has POWER account data showing what happens when members must meet monthly compliance obligations. And no other state has such comprehensive evidence that even simple requirements produce 15 to 20% failure rates among the population that work requirements will also target.
The contested employment data that shaped the SB 2 debate will resolve itself empirically. If FGA’s framing is right and half of HIP enrollees have zero income, Indiana will see either massive employment gains or massive coverage losses. If KFF’s data is right and three-quarters of the target population already works or qualifies for exemptions, Indiana will confirm what Arkansas demonstrated in 2018: that work requirements function primarily as documentation burdens on people who are already doing what the policy demands, with coverage losses concentrated among those who cannot navigate reporting systems rather than those who refuse to work.
The fiscal dynamics make Indiana’s outcome uniquely consequential. Because HIP is funded entirely through provider taxes and cigarette revenue rather than general fund appropriations, enrollment reductions from work requirement failures do not free up dollars for other state priorities. They reduce the revenue base that sustains the program. The managed care assessment fee race against federal provider tax restrictions adds urgency that other states do not face. Indiana must solve its financing puzzle and its verification puzzle simultaneously, and the two are not independent: each member lost to documentation failure reduces the justification for the provider tax revenue that makes the program financially viable.
The six-month delay imposed by CMS, pushing implementation from July 2026 to January 2027, gives Indiana additional preparation time it did not seek and does not want. That time could be used to build the navigation infrastructure that Arkansas lacked, the automated verification systems that Ohio is pursuing, and the exemption processing capacity that the compounding conditionality requirements demand. Or it could simply extend the planning period for a state that has been planning work requirements since 2017 without ever implementing them. Indiana has practiced conditionality. The question is whether practice makes perfect or whether it merely documents how hard the real thing will be.