States improperly dropping Medicaid participants due to programming errors

The Centers for Medicare and Medicaid has alerted states that they may be incorrectly disenrolling eligible participants—mostly children—from Medicaid and the Children’s Health Insurance Program, or CHIP.

In an Aug. 30 letter to state Medicaid directors, CMS Director Daniel Tsai wrote that due to “incorrect systems programming or operational issues,” several states were improperly disenrolling eligible individuals during the renewal process. 

The letter comes amid concerns that millions of low-income families, including those with children, could improperly lose their health insurance over the coming year with the end of the COVID public health emergency. During the pandemic, states were required to keep individuals on Medicaid rolls without annual reviews. Now that the PHE has ended, states must requalify all of the nation’s roughly 93 million low-income Medicaid recipients for coverage, a massive task CMS has given states 14 months to complete.

The issues raised by Tsai most commonly affect households with children, who are generally more eligible for federal benefits and can often be automatically re-enrolled through an ex parte review. Under that process, automated systems analyze federal, state and commercial data sources and deem people eligible to stay on Medicaid if they qualify for other low-income programs. In doing so, states can redetermine Medicaid eligibility even if they are unable to reach the recipients, a major concern for state Medicaid offices. The method is recommended by CMS because it is faster, more accurate and streamlines the workflow for both applicants and agency staff. Some but not all states take advantage of ex parte reviews. 

The disenrollment problem also targets individuals in households where additional documentation is required for Medicaid renewal. 

The improper disenrollment seems to have two primary causes, according to Tsai. In some cases, individuals were dropped from Medicaid rolls because states were considering the Medicaid eligibility of households as a whole, rather than evaluating the children separately from the parents. In other cases, states that hadn’t received a reply to a request for additional information to keep an enrollee in the program disqualified the whole household—even when individual members, primarily children, had already qualified via automated reviews. 

“Each of these examples is a violation of federal Medicaid and CHIP renewal regulations,” Tsai wrote. “The regulations require that states complete a redetermination of eligibility based on available information for each individual in the household, regardless of the eligibility of others in the household unit.”

According to data from the Kaiser Family Foundation, more than 5 million Medicaid enrollees have already lost coverage. That figure is based on the most current data (Aug. 29) available from the 47 states and the District of Columbia that report that information. In the 15 states that break out participants by age, children accounted for 43% of Medicaid disenrollments. 

“We don’t know yet how many states have this problem, but we expect at least half or more are likely impacted by this issue. A functioning ex parte process is essential to a smooth process for children,” Joan Alker, executive director of the Georgetown University Center for Children and Families, said in a statement. “While there are scenarios where adults could be impacted by this glitch, the reality is that children are undoubtedly the vast majority of those losing coverage inappropriately as a consequence.”

To ensure compliance, CMS is instructing all Medicaid and CHIP agencies to review their renewal processes, including all related standard operating procedures, renewal forms and notices. They must also test the renewal logic in their eligibility systems to ensure it is compliant with requirements to determine eligibility for each individual in the household.

States have until Sept. 13 to determine whether their systems are in compliance. If they find they have incorrectly dropped participants, they must immediately pause procedural terminations, reinstate coverage for those who have been improperly disenrolled, fix and test their systems and implement mitigation strategies to prevent continued inappropriate terminations.

In announcing the action, CMS said that states “must take these steps to protect coverage for eligible individuals, including children, in order to avoid additional federal oversight and action, such as CMS withholding a state’s enhanced federal funding or issuing a corrective action plan.” The agency also said it will work with states to provide technical assistance as they evaluate and address these issues. 

If states do not comply, Tsai warned that they could lose the federal funding Congress has been giving them to cover the cost of more people being on Medicaid during the pandemic through a 6.2% increase in what’s known as the Federal Medical Assistance Percentage, or FMAP.

In requiring the eligibility of all people on Medicaid to be re-evaluated in the omnibus spending bill passed in December, Congress agreed to extend the additional Medicaid funding. FMAP will gradually wind down to 5% in April, then 2.5% in June and finally 1.5% in October. 

But to continue receiving the funding, Congress set a number of requirements states have to follow.   

States that require return of a renewal form when some household members, such as children, have already been determined eligible by the ex parte process are “out of compliance with longstanding federal Medicaid and CHIP renewal requirements and, as a result, may be ineligible to claim the temporary [Federal Medical Assistance Percentage] increase,” Tsai wrote.