LEXINGTON, Ky. — Every day that Steve Olshewsky can convince himself to get out of bed and face the world is a small victory in his eyes.

After a series of panic attacks forced him out of work in 2009, Olshewsky returned to his hometown to recover with family. He's made great strides since then, thanks to medication and his work at Participation Station, a peer-run outpatient clinic for serious mental illness. There, he sits in on group sessions, teaches tai chi to members, and talks clients through rough days on the clinic phone line.

But Olshewsky, who pays for his prescriptions through Medicaid, could soon have to prove he deserves to keep his coverage under a new set of restrictions on able-bodied Medicaid recipients. The Trump administration approved the rules in January through a waiver program that allows states to experiment with changes to Medicaid.

Steve Olshewsky, 59, is a client of the Participation Station in Lexington, Ky., which provides safe spaces and services to people with mental illnesses. Raymond Thompson Jr / for NBC News

"I feel threatened," the 59-year-old Olshewsky said at a meeting with Participation Station members and staff to discuss the changes with NBC News last week. "If I wasn't on Medicaid, I wouldn't be sitting here."

Under the new system, called Kentucky HEALTH, non-elderly adult Medicaid recipients will have to hold a job or perform 80 hours a month of "community engagement" activity like classes and volunteering, pay a monthly premium of $1 to $15, earn their vision and dental treatment through a rewards program, and go through the enrollment process again every year. Those who fail to meet the requirements could lose their coverage or face additional co-pays.

Interviews with health professionals, administrators, patients and advocates preparing for the change reveal deep concerns. The new rules, they warn, will jeopardize health care for numerous vulnerable residents. The state has added over 450,000 residents to Medicaid through Obamacare, which provided funding for adults making up to 138 percent of the poverty line, and the new work requirements primarily affect this group.

The Medicaid changes are becoming a national flashpoint as the political parties diverge on health care, with Democrats increasingly treating government-backed health care as a fundamental right for all Americans and Republicans arguing it should be earned through work or limited to the most vulnerable citizens.

Nine other states have applied for waivers that include work requirements, according to the Kaiser Family Foundation. Virginia's Republican-led legislature is also considering an expansion of Medicaid that would include work requirements.

It's not the work requirement that has mental health professionals and patients most concerned, since the majority of affected Medicaid recipients work already. It's the additional paperwork. They worry that complying with the new system will drive up their administrative costs, create confusion among patients, and undercut the state's struggling campaign to contain an opioid and meth crisis.

"These are people who fall through the cracks, and there are a lot of them," said Kelly Gunning, director of advocacy for Lexington's chapter of the National Alliance on Mental Illness. "The cracks are about to get a lot bigger."

After frequently being cited as one of the Affordable Care Act's biggest success stories thanks to its coverage gains, Kentucky will now embark on a grand conservative experiment in personal responsibility. Past administrations had rejected requests to make similar changes out of concern they would block people from getting care, and now Kentucky is the first to be approved.

Gov. Matt Bevin, a Republican, has said Kentucky "will be a model for the nation" that will empower residents to lift themselves out of poverty. The new incentives, he and other supporters argue, will push people toward job training, and health- and financial-literacy classes that will improve their ability to take care of themselves.

But as state officials prepare to launch the new requirements in July, Olshewsky is worried. He's not sure if his condition qualifies for a medical exemption under the new requirements. He worries that he'll struggle with reporting his working hours and income and that a mistake could cause a lapse in coverage. He's afraid even a $15 premium might force him to choose between a heating bill and Medicaid in a bad month.

"Compare it to the businessmen who complain how the government slaps on all these regulations," he said. "How would you feel if they did the same, but for your life and your meds?"

Navigating a complex new system

These fears are especially acute at Participation Station, which specializes in clients who suffer from both mental illness and drug abuse. Some of their members are referred by a mental health court after run-ins with the law.

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Coaxing people into treatment is a daunting task. Getting them to work is a goal, but often just settling people into a healthy routine is the more immediate challenge. Even small setbacks, especially a delay in medication, can reverse hard-won progress. Staff members say they spend significant time helping clients navigate benefit forms and medical bills. Now, in addition to managing the work requirements, they'll have to explain a complex new system of savings accounts, deductibles and incentives.

"The impact of this is that our resources are stretched thinner," said Nathan Sames, a full-time volunteer with the National Alliance on Mental Illness through Americorps VISTA. "It’s just one more thing we have to help people with."

Nathan Sames, 28, an America Corp Vista volunteer, at the Participation Station in Lexington, Ky. Raymond Thompson Jr / for NBC News

While the clinic is free and does not take Medicaid funding, the program plays a big role in its patients' care. Substance abuse treatments rose seven-fold from 2014 to 2016 among people who gained Medicaid coverage when the state expanded the program under Obamacare, according to a study by the nonprofit Foundation for a Healthy Kentucky.

The new requirements mainly affect this expansion group, and Bevin has warned he plans to undo the Medicaid expansion entirely if a lawsuit challenging the Trump administration waiver succeeds. As it stands, the state expects the waiver to reduce Medicaid coverage by about 95,000 people, some of whom will leave after finding insurance elsewhere and others who will fail to comply with the rules.

"I can’t help but wonder if that’s not what they're hoping for," Gunning said. "People giving up."

Nearly 200,000 may be affected

On a Monday at the Louisville Department of Public Health and Wellness, staff members representing the city's health officials, medical clinics, advocacy groups and managed care organizations are taking seats for their monthly meeting. The room is just down the hall from a busy needle-exchange program.

The meetings began in 2013 to brainstorm ways to cover the most people possible through the new Affordable Care Act. Under then-Gov. Steve Beshear, a Democrat, Kentucky recorded one of the biggest coverage gains of any state, with the rate of uninsured dropping to 5.1 percent in 2016 from 14.3 percent in 2013, according to census figures.

Now they have a new task: preparing for Kentucky HEALTH, the new program that will include the waiver's additional requirements.

"Our focus has shifted from getting people coverage to making sure they keep it," said Bill Wagner, who oversees the meeting and serves as chief executive director of Family Health Centers.

Both nationally and in Kentucky, most nonelderly Medicaid recipients are already working. Among those who aren't, many may qualify for various exemptions built into Kentucky's waiver for caregivers, pregnant women, substance abusers, the homeless and people who are "medically frail." The struggle is getting them into the system and keeping them there.

Bill Wagner, the chief executive director of Family Health Centers in Louisville, Ky. Raymond Thompson Jr / for NBC News

A study by the nonpartisan Urban Institute estimated that out of 653,000 nonelderly adults on Kentucky’s Medicaid program, 188,000 are not working and potentially not exempt. Of that group, 61 percent report they or a household member have a "serious health limitation" and 26 percent lack internet access.

Based on his own rough estimate, Wagner told the room they should assume roughly 40,000 nonworking enrollees in the Louisville metro area are in danger of losing coverage.

"So many are at risk just from the reporting requirements, even ones that are working," Wagner told the group.

The state has budgeted $187 million to implement its plan, most of which is paid for by the federal government, and is promising a smooth transition to a new online system to manage the program. But participants are skeptical they can get things running so quickly. When the administration rolled out its new benefits website in 2016, it accidentally cut off coverage for thousands of people, creating a panic throughout the state.

Attendees at the meeting had a long list of questions that they fear the state is addressing too slowly. Will the system to track work hours be easily accessible even if people don't have a computer or smartphone? Who counts as "medically frail" and will the application be simple enough for them and their doctors to follow? How will nonprofits, some of which are already warning they don't have room for a surge of volunteers, meet the demand for "community engagement" hours? What about workers whose hours and income fluctuate, like waitresses, Uber drivers and seasonal workers?

Participants were especially concerned by a study of Indiana's recent experiment with charging monthly payments for Medicaid. The report, conducted by the Lewin Group on behalf of the state, found that 55 percent of affected enrollees missed at least one required contribution after 21 months — about 325,000 people — prompting the state to drop them or scale back their coverage. Of those who failed to pay, most reported being unable to afford it or confused by the system.

"I think we can do better here in Kentucky," said Emily Beauregard, executive director of the advocacy group Kentucky Voices For Health. "I hope we will, but it’s going to take planning."

'They could die'

At Bridgehaven, a mental health clinic in Louisville, the changes are a constant topic of conversation as rumors fly about what they mean for patients.

"For people on Medicaid, it's terrifying," Tara Bassett, a marketing and clinical referral specialist at Bridgehaven, said at a weekly public luncheon where clients testify about their experience. "We deal every single day with members who are living in fear of having their services taken away from them."

Tara Bassett, a development specialist, touches the knee of Kimberly Singleton for support during a presentation at Bridgehaven Mental Health Services. Raymond Thompson Jr / for NBC News

Bridgehaven receives its funding overwhelmingly from Medicaid and its administrators are preparing for reams of new red tape with no obvious way to add staff to help. Bassett, who came to the clinic after her career in news was interrupted by depression, says she's on Medicaid herself and will be dealing with the rule changes.

"We don't know how it's going to impact our organization, we just know it's a frightening prospect," said Ramona Johnson, the clinic's CEO and president. "We don't want to shrink."

Johnson sympathizes with the intent of the health changes. Like the governor, Bridgehaven believes work is critical to building up self-esteem and independence. Downstairs from the meeting, a member-run general store teaches people skills like using a cash register and restocking inventory. Some of their most productive staff started out as clients.

"There are many of us who are working and doing everything we can," Bassett said. "A huge percentage of people on Medicaid are already working."

What they don't understand is how the new requirements are likely to help. Their fear is that a person who loses coverage, either by not being able to work or by failing to figure out the new requirements, could fall into a spiral that makes employment even harder.

"The thing I worry about is the unforeseen consequences," said Brandon Banks, 36, a peer support specialist at the clinic. "If someone is in a crisis and doesn't submit their paperwork … if somebody loses their medications, they could end up back on the street."

"They could die," added Cody Williamson, 35, one of Banks' clients. "If I don’t get meds, I will be suicidal."

Cody Williamson speaks to Brandon Banks, a peer support specialist at Bridgehaven Mental Health Services in Louisville, Ky. Raymond Thomspon Jr / for NBC News

Williamson considers himself one of the clinic's success stories. He says he arrived after a suicide attempt put him in the hospital for an extended period and left him with a tracheal tube. At the time he was "550 pounds of depressed." Since then he's lost hundreds of pounds and built a tight relationship with Bridgehaven members, where he's earned a reputation for his Beyoncé renditions at open mic nights.

For now, his disability status means he's exempt from the changes. But his improvement has been dramatic enough that he's not sure how long it will continue and he's afraid of being pushed too hard, too fast. He's especially worried about others who don't have the same support network.

"It's amazing how fast I can fall," he said.