Medicaid Expansion Will Not Increase Mississippi’s Labor Force Participation Rate

Krit Chanwong and Marc Joffe

On February 28, 2024, Mississippi’s House of Representatives voted overwhelmingly to approve the expansion of the Medicaid program to all adults earning less than 138 percent of the federal poverty line. 

Some of Mississippi’s lawmakers approved of Medicaid expansion because they believed the policy would increase labor force participation. This is because healthy people are likelier to participate in the labor market. Thus, putting more people on Medicaid would increase the number of healthy people and lead to increases in the labor force. To ensure that this sequence of events occurs, Mississippi has imposed a community engagement requirement, conditioning Medicaid expansion coverage on working, getting an education, or participating in work‐​related training.

Mississippi’s labor force participation rate is indeed very low, both by historical standards and compared to other states. However, from 2018 to 2019, Arkansas enacted an almost identical policy to Mississippi’s proposed legislation. Arkansas’s work requirements did not meaningfully improve labor force participation and should serve as a lesson for Mississippi’s legislators.

Medicaid Work Requirements and Labor Force Participation: Arkansas’s Experience

In 2018, the Department of Health and Human Services (HHS) encouraged states to make work requirements part of their Medicaid programs. Arkansas was one of the 13 states that did.

Arkansas’s Medicaid work requirements program was called Arkansas Works. The program required all Medicaid expansion beneficiaries aged 19 to 49 to “work or engage in specified educational, job training, or job search activities for at least 80 hours per month.” Those who failed to comply and did not receive an exemption would be disenrolled from Medicaid. The HHS secretary approved Arkansas Works on March 5, 2018, allowing the program to go on until the end of 2021. In April 2019, a federal judge ended the program.

Arkansas Works was filled with bureaucratic confusion. A December 2018 focus group run by the Kaiser Family Foundation found that beneficiaries “were not receiving notices at their correct address, despite having reported an address change to the state.” Moreover, a February 2019 Kaiser Family Foundation brief found that 5 percent of all Arkansas Works enrollees had their cases dropped due to problems with communication—not with failures to meet work and reporting requirements.

Moreover, Arkansas Works also did not meaningfully increase the state’s labor force participation rate. Figure 1 shows various measures of Arkansas’s labor force participation rate from 2017 to 2020. The periods for which Arkansas Works was active are shown in between the dashed vertical lines.

Arkansas’s total labor force participation did not increase. Moreover, prime‐​age (25–54) workforce participation rate during this period also did not increase meaningfully, hovering around 78 percent in 2018 to 80 percent in 2020.

What is most striking, however, is that labor force participation rates for Medicaid beneficiaries aged 19 to 49 did not meaningfully increase. From 2018 to 2019, this demographic’s labor force participation increased from 54 percent to 55 percent. This increase, however, was much slower than the 14 percent increase in labor force participation that occurred from 2017 to 2018. Moreover, this increase continued even after Arkansas Works was put on hold. So, the effects of Arkansas Works on the labor force participation rate seem to be minimal at best.

The above analysis is confirmed by a more sophisticated observational study of 2,706 individuals conducted by Harvard University researchers. This study found “no significant changes in employment, number of hours worked, or community engagement status between 2018 (during work requirements) and 2019 (after work requirements were put on hold).”

What accounts for the failure of Arkansas Works to increase labor force participation? In Arkansas’s case, it is because “95% of beneficiaries [surveyed by the Harvard University researchers] already met the state’s Medicaid work requirements or should have been eligible for an exemption.” And this failure was expensive: the Government Accountability Office estimates that it cost $26.1 million to administer Arkansas’s Medicaid work requirements program.

Arkansas’s experience with work requirements should inform Mississippi for two reasons. First, Mississippi’s work requirements program is almost identical to Arkansas’, with only slight differences in age limits. Second, Mississippi and Arkansas are two states with similar demographic profiles. As such, it is likely that Mississippi’s Medicaid work requirements will simply result in millions of dollars in additional spending without any appreciable improvements in outcomes.

How to Increase Mississippi’s Labor Force Participation?

Figure 2 and Figure 3 show long‐​term trends in Mississippi’s labor force participation rate, with the horizontal dashed red line showing the 40‐​year average.

Although Mississippi’s total labor force participation rate is at an all‐​time low, Mississippi’s prime‐​age labor force participation rate (those aged 25–54) is close to the long‐​term average. This implies that population aging has been driving much of Mississippi’s labor force decline. Figure 4 verifies this.

Medicaid expansion does not provide any tools for remedying an aging population. In fact, it is unclear whether anything can be done. But if Mississippi’s legislators genuinely want to increase the Magnolia state’s labor force participation, they should consider occupational licensing reform. Reforming over‐​stringent occupational restrictions allows more people to be qualified for jobs. This would directly increase the labor force participation rate. It would also increase the number of services available, thus reducing the costs of services to consumers.

Figure 5 plots the relationship between the 2022 occupational licensing score from Cato’s Freedom in the 50 States (higher is freer) and the December 2022 labor force participation rate. Although the relationship is not perfectly linear, Figure 5 suggests that there is a moderately positive relationship between more liberal occupational licensing regulations and higher labor force participation.

Mississippi’s occupational licensing score has decreased significantly, falling from a rank of 14th in 2000 to 26th in 2022. Reducing barriers to work is more likely to reinvigorate Mississippi’s labor market than the expansion of the welfare state.