Michigan has spent more than $30 million on implementing new work requirements for Medicaid recipients just ruled illegal by a federal judge, and the state now faces a “substantial expense” to wind down the work-requirement program, state officials say.

“Months of effort and dollars were spent ... (with) little effect,” said Robert Gordon, director of the Michigan Department of Health and Human Services, who has opposed the work rules. “I think that $30 million could have been better spent in any number of different areas.”

He said the expenditure is particularly “unfortunate” because of strong indications for months that the federal courts would rule the work requirements to be illegal.

Gordon made remarks Wednesday during and after a hearing by the Michigan Senate Appropriations Subcommittee on Community Health/Human Services, in which Gordon was scheduled to give a presentation on his department’s implementation of the new rules, which went into effect Jan. 1.

But shortly before the hearing, a federal judge in Washington, D.C., issued a partial summary judgment blocking the work-requirement law. The ruling means Michigan must stop enforcing the law immediately.

U.S. District Court blocks Michigan’s new Medicaid work requirement rules

Republican lawmakers have defended the law, which was passed in 2018 under former Gov. Rick Snyder. It requires able-bodied adults receiving Medicaid under the Healthy Michigan plan to do 20 hours per week, or 80 hours per month, of “workforce engagement," such as working or going to school.

State Sen. Peter MacGregor, R-Rockford, who chairs the subcommittee and presided over Wednesday’s hearing, pushed back against Gordon’s suggestion that Michigan should have paused implementation while awaiting the court challenges to play out.

“In my eyes, the law is the law until the Supreme Court rules and the process is complete,” MacGregor said, although he conceded, “we’re probably at a standstill at this point."

Almost 700,000 Michigan residents are enrolled in the Healthy Michigan plan, which is available to people age 19 to 64 with a household income below 133% of the federal poverty guideline. Gordon estimated about 100,000 could have lost coverage by failing to fulfill the new work requirements.

Gov. Gretchen Whitmer, a Democrat, has argued against the work rules, saying the experience in other states indicates that implementation is expensive and does not yield increases in employment, the GOP’s stated goal.

She and others also have pointed to the success of federal lawsuits challenging the Medicaid work requirements. On Wednesday, Gordon noted the appeals court panel heard oral arguments in October and it was clear that all three judges on the panel -- including a conservative judge appointed by President Reagan -- were “very skeptical” about the legality of Medicaid work rules.

After the oral arguments, both Indiana and Arizona -- which each have a Republican governor and legislature -- paused their work requirements, Gordon said. But the Michigan Legislature refused Whitmer’s request to the same in Michigan.

That meant his department continued to spend considerable time and energy on implementing a law that now has been voided. “It’s been about a million dollars a month,” Gordon said.

That includes the cost of figuring out which Medicaid recipients would have to file regular reports and which were exempt; developing computer programs to track those recipients; sending hundreds of thousands of letters to Medicaid recipients about the new requirements, and outreach programs to educate the public on the new rules.

Now, it will cost millions more to notify recipients that the work requirements are no longer in place, Gordon said.

MacGregor said the point of the work-requirements is to “lift people up.”

“The Legislature needs to make sure that these people are lifted up, and not just given handouts,” he said. “Workforce engagement was one of those tools that we used.”

Gordon said he agreed with the importance of getting people into the workforce and encouraging financial independence.

But, he said after the hearing, "I don’t think (Medicaid) work requirements promote work. There’s evidence showing this; the Arkansas work requirements led to zero increases in employment. Since we started the Healthy Michigan program, the share of those people working has increased by 6%.

“Could we do more to promote work? Absolutely," Gordon said. “But we should be working together on initiatives that promote work without taking away people’s health insurance.”

Related:

Whitmer signs bill to change Medicaid work requirement reporting, says legislature should do more

Gov. Whitmer asks legislature to halt Medicaid work requirements

Michigan lawmakers to Whitmer: We’re not pausing Medicaid work requirements

Lawsuit challenges Michigan’s Medicaid work requirements