The X factor: How Skyrocketing Medicaid Enrollment is Driving Down the Labor Force

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KEY FINDINGS

Background

There is one common theme in nearly every store window across the nation. One thing that supersedes the uniqueness of regions, the boundaries of states, the variety of businesses: “Help wanted.”

The economy is attempting to recover, but the lack of workers threatens a full recovery.1Hayden Dublois and Jonathan Ingram, “How the era of expanded welfare benefits is keeping Americans from working,” Foundation for Government Accountability (2021), https://thefga.org/paper/expanded-welfare-keeping-americans-from-working There are more than 10 million open jobs nationwide, a near-record high, and not enough workers to fill them.2Author’s calculations based upon data provided by the U.S. Department of Labor on the number of open jobs and the ratio of unemployed persons to open jobs.3Bureau of Labor Statistics, “Job openings and labor turnover survey: Job openings,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/JTS000000000000000JOL4Bureau of Labor Statistics, “Job openings and labor turnover survey: Unemployed persons per job opening ratio,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/JTS000000000000000UOR

Although employers are desperate to fill these openings, nearly four million Americans are still missing from the workforce.5Author’s calculations based upon data provided by the U.S. Department of Labor on the change in the labor force participation rate since February 2020 and the most recent civilian noninstitutional population estimates.6In February 2020, the labor force participation rate was 63.4 percent. By December 2021, it had fallen to 61.9 percent. See, e.g., Bureau of Labor Statistics, “Civilian labor force participation rate,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LNS113000007In December 2021, the total civilian noninstitutional population aged 16 or older was 262.1 million. See, e.g., Bureau of Labor Statistics, “Civilian noninstitutional population,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LNU000000008If the labor force participation rate in December 2021 had matched its February 2020 rate, the labor force would have been more than 3.9 million people larger.

Worse yet, recent data reveals that more than four million Americans recently quit their jobs—the highest quit rate in American history.9Author’s calculations based upon data provided by the U.S. Department of Labor on the number of quits in November 2021. See, e.g., Bureau of Labor Statistics, “Job openings and labor turnover survey: Quits,” U.S. Department of Labor (2021),
https://data.bls.gov/timeseries/JTS000000000000000QUL
There are more open jobs than people looking for work, and the reason is simple: Government benefits have made staying at home pay better than work.10Jonathan Bain and Jonathan Ingram, “A proven blueprint for success: How ending unemployment expansions can kickstart America’s economic comeback,” Foundation for Government Accountability (2021), https://thefga.org/paper/ending-unemployment-expansions11Hayden Dublois and Jonathan Ingram, “Paid to stay home: How the $300 weekly unemployment bonus and other benefits are stifling economic recovery,” Foundation for Government Accountability (2021), https://thefga.org/paper/unemployment-bonus-stifling-economic-recovery12Jonathan Ingram and Hayden Dublois, “There has never been a better time to get Americans back to work,” Foundation for Government Accountability (2021), https://thefga.org/paper/americans-back-to-work13Alli Fick and Nic Horton, “The under-told story of America’s labor crisis,” Foundation for Government Accountability (2021), https://thefga.org/paper/america-labor-crisis14Hayden Dublois and Jonathan Ingram, “How the new era of expanded welfare programs is keeping Americans from working,” Foundation for Government Accountability (2021), https://thefga.org/paper/expanded-welfare-keeping-americans-from-working

This is perhaps nowhere more evident than within the Medicaid program. While the economy has struggled to bounce back, enrollment in Medicaid has soared to new heights.15Hayden Dublois and Jonathan Ingram, “The Medicaid crisis is here: How Congressional handcuffs are causing Medicaid to implode,” Foundation for Government Accountability (2021), https://thefga.org/paper/congressional-handcuffs-causing-medicaid-to-implode

The “X Factor”: While the Labor Force is Shrinking, Medicaid is Surging

Getting people off the sidelines and back to work continues to be a problem. In 2000, the labor force participation rate was just over 67 percent.16Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation, disaggregated by month and averaged by federal fiscal year. See, e.g., Bureau of Labor Statistics, “Civilian labor force participation rate,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LNS11300000 But two decades later, it had fallen by more than eight percent.17Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation, disaggregated by month and averaged by federal fiscal year. See, e.g., Bureau of Labor Statistics, “Civilian labor force participation rate,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LNS11300000 Today, labor force participation sits near a 45-year low, and is comparable to the 1970s—a time when most women were still not in the workforce.18Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation, disaggregated by month and averaged by federal fiscal year. See, e.g., Bureau of Labor Statistics, “Civilian labor force participation rate,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LNS11300000

Over the same period, Medicaid enrollment experienced massive growth, with nearly 50 million more people added to the rolls.19Author’s calculations based upon data provided by the U.S. Department of Health and Human Services and the Medicaid and CHIP Payment and Access Commission on Medicaid enrollment, disaggregated by year.20Medicaid and CHIP Payment and Access Commission, “Medicaid enrollment and total spending levels and annual growth, fiscal years 1970-2020,” Medicaid and CHIP Payment and Access Commission (2021), https://www.macpac.gov/wp-content/uploads/2015/11/EXHIBIT-10.-Medicaid-Enrollment-and-Total-Spending-Levels-and-Annual-Growth-FYs-1970–2020.pdf21Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx22Hayden Dublois and Jonathan Ingram, “The Medicaid crisis is here: How Congressional handcuffs are causing Medicaid to implode,” Foundation for Government Accountability (2022), https://thefga.org/paper/congressional-handcuffs-causing-medicaid-to-implode This is the “X factor” facing America today—surging Medicaid enrollment and a shrinking workforce.

But it is not the truly needy driving this Medicaid enrollment surge—it is able-bodied adults.

Since 2000, the Medicaid rolls have spiked by a whopping 27 million able-bodied adults.23Author’s calculations based upon data provided by the U.S. Department of Health and Human Services and the Medicaid and CHIP Payment and Access Commission on Medicaid enrollment, disaggregated by year and eligibility group.24In fiscal year 2000, approximately 6.9 million able-bodied adults were enrolled in Medicaid. See, e.g., Centers for Medicare and Medicaid Services, “2018 actuarial report on the financial outlook for Medicaid,” U.S. Department of Health and Human Services (2020), https://www.cms.gov/files/document/2018-report.pdf25In fiscal year 2019, approximately 34 million able-bodied adults were enrolled in Medicaid. See, e.g., Medicaid and CHIP Payment and Access Commission, “Medicaid enrollment by state, eligibility group, and dually eligible status: Fiscal year 2019,” Medicaid and CHIP Payment and Access Commission (2021), https://www.macpac.gov/wp-content/uploads/2015/01/EXHIBIT-14.-Medicaid-Enrollment-by-State-Eligibility-Group-and-Dually-Eligible-Status-FY-2019-thousands.pdf Much of this growth is the result of states expanding Medicaid under ObamaCare. Between 2013 and 2018, for example, able-bodied adult enrollment nearly doubled, while enrollment in the rest of the Medicaid program grew by just two percent.26Author’s calculations based upon data provided by the U.S. Department of Health and Human Services on Medicaid enrollment, disaggregated by year and eligibility group. See, e.g., Centers for Medicare and Medicaid Services, “2018 actuarial report on the financial outlook for Medicaid,” U.S. Department of Health and Human Services (2020), https://www.cms.gov/files/document/2018-report.pdf In states that expanded Medicaid, more than twice as many able-bodied adults signed up for the program as expected, leading to major enrollment spikes and budget overruns.27Jonathan Ingram and Nic Horton, “A budget crisis in three parts: How ObamaCare is bankrupting taxpayers,” Foundation for Government Accountability (2018), https://thefga.org/paper/budget-crisis-three-parts-obamacare-bankrupting-taxpayers

Rather than able-bodied adults powering the growth of the workforce, they are driving up Medicaid enrollment, consuming resources that could instead go to the truly needy.

Government benefits have made it more lucrative to stay at home rather than return to work. And although there has never been a better time to return to work, workforce growth remains sluggish while Medicaid enrollment is exploding.28Jonathan Ingram and Hayden Dublois, “There has never been a better time to get Americans back to work,” Foundation for Government Accountability (2021), https://thefga.org/paper/americans-back-to-work     

States Are Struggling as a Result

Over the last 20 years, every state has seen a drop in its labor force and a surge in Medicaid enrollment.29Author’s calculations based upon data provided by the U.S. Department of Health and Human Services, the Medicaid and CHIP Payment and Access Commission, and the U.S. Department of Labor. And Medicaid handcuffs have only exacerbated an existing problem as states try to move towards economic recovery. For a full recovery to take effect, states desperately need to bolster their workforce, not their welfare programs.

MISSOURI MEDICAID MAYHEM

Missouri policymakers have struggled with skyrocketing Medicaid enrollment and spending for decades. Missouri’s Medicaid spending nearly tripled over the last two decades, with the program eating up nearly 40 percent of the entire budget—all before Medicaid expansion went into effect.30Hayden Dublois and Jonathan Ingram, “Ineligible Medicaid enrollees are costing taxpayers billions,” Foundation for Government Accountability (2022), https://thefga.org/paper/ineligible-medicaid-enrollees-costing-taxpayers-billions By 2020, nearly one in five Missourians were on Medicaid.31Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx With Missouri implementing ObamaCare expansion effective October 1, 2021, enrollment will only soar higher, as expansion could add nearly 600,000 more enrollees to the program.32Hayden Dublois and Jonathan Ingram, “Ineligible Medicaid enrollees are costing taxpayers billions,” Foundation for Government Accountability (2022), https://thefga.org/paper/ineligible-medicaid-enrollees-costing-taxpayers-billions

Meanwhile, the state’s labor force has already taken a drastic hit. Over the past two decades, Missouri’s labor force has shrunk by 11 percent.33Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation in Missouri. See, e.g., Bureau of Labor Statistics, “Local area unemployment statistics: Labor force participation rate in Missouri,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LASST290000000000008 Now, more than ever, Missouri needs its residents to get off the sidelines and back to work. But unfortunately, able-bodied adults are opting to stay at home rather than re-enter the workforce.34Hayden Dublois and Jonathan Ingram, “How the era of expanded welfare benefits is keeping Americans from working,” Foundation for Government Accountability (2021), https://thefga.org/paper/expanded-welfare-keeping-americans-from-working 

GEORGIA’S SITUATION IS NOT PEACHY

Georgia’s Medicaid program has seen skyrocketing growth over the last two decades. In 2000, the state’s Medicaid program had just 913,000 individuals enrolled.35Centers for Medicare and Medicaid Services, “2001 Medicaid full-year eligibles and monthly eligible,” U.S. Department of Health and Human Services (2001), https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/MedicaidDataSourcesGenInfo/MSIS-Tables-Items/CMS1238667 But by 2020, enrollment had swelled to nearly 2.2 million enrollees—an increase of 140 percent.36Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx 

Meanwhile, Georgia’s labor force participation suffered a sharp decline, experiencing an 11 percent drop over the same period.37Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation in Georgia. See, e.g., Bureau of Labor Statistics, “Local area unemployment statistics: Labor force participation rate in Georgia,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LASST130000000000008 In a time when work pays better than ever, fewer Georgians are entering the workforce and are instead choosing to stay home.38Jonathan Ingram and Hayden Dublois, “There has never been a better time to get Americans back to work,” Foundation for Government Accountability (2021), https://thefga.org/paper/americans-back-to-work

KENTUCKY’S COLOSSAL MEDICAID GROWTH

Kentucky’s Medicaid program has exploded in recent years. Since 2000, Kentucky has added more than a million new enrollees to Medicaid—an increase of 153 percent.39Authors’ calculations based upon data provided by the U.S. Department of Health and Human Services on Medicaid enrollment, disaggregated by year.40Centers for Medicare and Medicaid Services, “2001 Medicaid full-year eligibles and monthly eligible,” U.S. Department of Health and Human Services (2001), https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/MedicaidDataSourcesGenInfo/MSIS-Tables-Items/CMS123866741Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx Much of this growth has been driven by then-Governor Steve Beshear’s unilateral decision to expand Medicaid to a new class of able-bodied adults under ObamaCare. More than 600,000 able-bodied adults have enrolled in the Medicaid expansion—more than triple the number state officials expected.42-4342Jonathan Ingram and Nic Horton, “ObamaCare expansion enrollment is shattering projections: Taxpayers and the truly needy will pay the price,” Foundation for Government Accountability (2016), https://thefga.org/paper/obamacare-expansion-enrollment-is-shattering-projections-243Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx 

As more able-bodied adults enroll into Medicaid, the state’s labor force is trending downward. Since 2000, labor force participation has decreased by 11 percent in Kentucky, with nearly half of adults now sitting on the sidelines.44Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation in Kentucky. See, e.g., Bureau of Labor Statistics, “Local area unemployment statistics: Labor force participation rate in Kentucky,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LASST130000000000008 

If Kentucky is to have an economic comeback, able-bodied adults must be moved from welfare to work. 

UNSUSTAINABLE ENROLLMENT IS SINKING IDAHO

Over the last 20 years, Idaho’s Medicaid enrollment has grown by a whopping 206 percent—with more than one in five Idahoans now on the program.45-4745Authors’ calculations based upon data provided by the U.S. Department of Health and Human Services on Medicaid enrollment, disaggregated by year.46Centers for Medicare and Medicaid Services, “2001 Medicaid full-year eligibles and monthly eligible,” U.S. Department of Health and Human Services (2001), https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/MedicaidDataSourcesGenInfo/MSIS-Tables-Items/CMS123866747Centers for Medicare and Medicaid Services, “October – December 2020 Medicaid MBES enrollment,” U.S. Department of Health and Human Services (2021), https://www.medicaid.gov/medicaid/program-information/downloads/viii-group-break-out-q1-2021.xlsx In fact, between February 2020 and May 2021 alone, Idaho saw nearly 75,000 new enrollees added to the program.48Hayden Dublois and Jonathan Ingram, “The Medicaid crisis is here: How Congressional handcuffs are causing Medicaid to implode,” Foundation for Government Accountability (2022), https://thefga.org/paper/congressional-handcuffs-causing-medicaid-to-implode 

But as the state’s Medicaid program is growing rapidly, the workforce is being depleted. Indeed, over the same period, labor force participation has decreased by nearly 10 percent.49Author’s calculations based upon data provided by the U.S. Department of Labor on labor force participation in Idaho. See, e.g., Bureau of Labor Statistics, “Local area unemployment statistics: Labor force participation rate in Idaho,” U.S. Department of Labor (2021), https://data.bls.gov/timeseries/LASST160000000000008 Instead of able-bodied adults returning to work, they are filling up the Medicaid rolls. 

If Idaho is to reverse course and overcome these Medicaid woes, able-bodied adults must return to work. 

These states should serve as a stark warning for their neighbors, and for other states across the country. Without a change, this dire situation will only get worse. 

When There is a Shortage of Able-Bodied Workers, the Economy Suffers

While President Biden boasted that “this recovery is faster, stronger, fairer, and wider than almost anyone could have predicted,” this could not be further from the truth.50Megan Cassella, “’Back into gear’: Solid jobs report boosts Biden’s case for recovery,” Politico (2021), https://www.politico.com/news/2021/11/05/biden-recovery-solid-jobs-report-519707 In fact, not only has the recovery remained sluggish as millions of workers sit on the sidelines, but Biden’s $1.9 trillion “stimulus” package did not create even a single promised job in 2021.51Matt Weidinger, “December jobs report confirms Democrats’ $1.9 trillion American Rescue Plan didn’t produce a single promised job in 2021,” American Enterprise Institute (2022), https://www.aei.org/poverty-studies/december-jobs-report-confirms-democrats-1-9-trillion-american-rescue-plan-didnt-produce-a-single-promised-job-in-2021 

While many sectors of the economy are struggling, small businesses are being hit the hardest. In fact, most small businesses report major difficulties hiring workers, despite offering higher wages, signing bonuses, and other benefits.52-5352Hayden Dublois and Jonathan Ingram, “There has never been a better time to get Americans back to work,” Foundation for Government Accountability (2021), https://thefga.org/paper/americans-back-to-work53Eric Rosenbaum, “America’s small businesses still can’t find workers, but that’s not their biggest problem,” CNBC (2021), https://www.cnbc.com/2021/08/10/the-labor-shortage-isnt-main-streets-biggest-problem.html 

Unfortunately, the next step for many small businesses is closure—with 57 percent of small businesses facing permanent closure if these trends do not reverse course.54Digital, “Survey: Delta shutdown will force 3 in 5 small businesses to permanently close,” Digital (2021), https://digital.com/survey-delta-shutdown-will-force-3-in-5-small-businesses-to-permanently-close 

Unless there is a permanent change, and able-bodied adults are moved from welfare to work, the American economy may never reach its full potential.

BOTTOM LINE: Lawmakers should move able-bodied adults from welfare to work to help solve the workforce shortage.

Over the past two decades, uncontrollable Medicaid growth—to which able-bodied adults are the major contributor—and the congressional expansion of welfare benefits have created hurdles that are stalling economic recovery. In a time when work pays better than ever, Americans are reaching for welfare applications instead of job applications. 

The time for action is now. To kickstart the American comeback, states must adopt policies that move able-bodied adults from welfare to work. Such a move would protect the truly needy and help solve the labor force issues plaguing states.

APPENDIX 1: MEDICAID ENROLLMENT FROM 2000-2020

APPENDIX 2: LABOR FORCE PARTICIPATION RATES FROM 2000-2020