b. Costs to Medicaid Beneficiaries

The reallocation of the time of Medicaid participants toward work also has an opportunity cost according to the value of the activities foregone while working, such as leisure time or work done in the home. Labor market participants are expected to supply labor up to the point where their marginal opportunity cost equals the benefit of work net of taxes (including income, payroll, sales and excise taxes) and forgone government assistance. For consistency with the benefit section of this economic analysis, we take the hourly benefit before subtracting taxes to be the MPL of $24.84. For individuals potentially eligible for Medicaid, the foregone government assistance (including State and local assistance) can be substantial, and sometimes exceeds the MPL. Following the White House Council of Economic Advisers (2019), we estimate the gap between the MPL and the opportunity cost of time as 48 percent of the MPL. [ 145 ] That is, we use an opportunity cost of time of $12.92 per hour (= $24.84 * (1−0.48)).

Some of the beneficiaries are expected to fulfill the community engagement requirement by community service, work program participation, or an educational program rather than paid work. This RIA estimates the hourly opportunity cost of these non-paid community engagement activities at the same $12.92 as paid work.

Notably, the MPL exceeds the opportunity cost of work for the economy as a whole, even when they are equal from the worker's perspective. This is known in labor economics, public economics, and macroeconomics as “the labor wedge” and is one of the most quantitatively significant features of labor markets. [ 146 147 ]

The increase in the nation's labor supply due to this IFC may affect the wages and employment decisions of workers and employers that are not part of the Medicaid program. These market equilibrium effects are reasonably approximated as neither aggregate costs nor benefits and do not need to be assessed here. [ 148 ]

As specified at § 435.552, an applicable individual demonstrates community engagement for a month if they work, complete community service, or participate in a work program for not less than 80 hours; enroll in an educational program at least half-time; or have monthly income, or average monthly income over the preceding 6 months as a seasonal worker, that is not less than the Federal minimum wage multiplied by 80 hours. Individuals can also demonstrate community engagement through a combination of qualifying activities. The combined time ( printed page 33455) for all activities must be a total of not less than 80 hours per month. At § 435.553, we specify that States must deem any individual for a month as having demonstrated community engagement, if: (1) for all or part of a month, the individual was under the age of 19, entitled to or enrolled for Medicare benefits under Part A or enrolled for benefits under Part B, described in any of the mandatory eligibility groups in subclauses (I) through (VII) of section 1902(a)(10)(A)(i) of the Act, or a specified excluded individual; or (2) at any point during the 3 months prior to the month in question, the individual was an inmate of a public institution. Moreover, we specify that specified excluded individuals defined at § 435.554 are excluded from the definition of applicable individual; therefore, community engagement is not a condition of their eligibility. Additionally, section 1902(xx)(3)(A) of the Act establishes mandatory exceptions from demonstrating community engagement via the pathways described in § 435.552(a) (see section II.C. of this IFC for more information regarding demonstrating compliance) for certain applicable individuals. States must deem an applicable individual compliant for a month if the individual meets the mandatory exception criteria (which are further described in this section of this IFC). New § 435.553 implements and interprets the mandatory exceptions in section 1902(xx)(3)(A) of the Act.

We anticipate some Medicaid beneficiaries and applicants will be required to provide additional information or documentation to verify that they demonstrated community engagement, should be deemed as having demonstrated community engagement through an exception, or be excluded from the community engagement requirement as a specified excluded individual. Applicants and beneficiaries may have to submit documentation if the State cannot verify compliance or deem compliance with the community engagement requirement or an individual's specified excluded status based on data sources or other available information to the State. Applicable beneficiaries may also need to document, track, and submit information to a State about their short-term hardship exception related to receipt of institutional or inpatient services or other services of similar acuity or when they or a dependent must travel outside of their community to receive certain medical services.

These quantified costs align with and are reflected in section IV. of this IFC. For ease of reference, and for projection purposes, we include a summary of total costs for new Medicaid applicants and Medicaid beneficiaries in Table 35.