Medicaid insurers and hospitals are expected to see little effect from the push, and massive disenrollment is seen as unlikely.

April 13—Amid a recent finding that three states spent more than $1 billion on enrolling ineligible Medicaid beneficiaries, the Trump administration is prioritizing the verification of eligibility among the 11 million who were added to the Medicaid rolls through healthcare reform.

The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services reviewed Medicaid eligibility determinations by California, New York, and Kentucky and found the states did not comply with federal and state eligibility determination requirements. Those missteps resulted in more than $1.2 billion in federal payments—in just one year—for nearly 600,000 enrollees who were either ineligible or potentially ineligible, according to OIG projections.

The OIG findings were cited this week by an administration executive at a hearing of two subcommittees of the House Oversight and Government Reform Committee as driving plans to focus on enrollees’ eligibility—specifically the eligibility of the 11 million who were added under the Affordable Care (ACA).

The ACA allowed states to expand their Medicaid program’s eligibility to anyone earning up to 138 percent of the federal poverty level. Thirty-two states have undertaken the Medicaid expansion, bringing total enrollment to around 70 million, and Virginia legislators may soon agree on an expansion.

“We’re bolstering our ongoing efforts to ensure that states are appropriately determining eligibility for beneficiaries in the expansion population,” said Tim Hill, deputy director of the Centers for Medicaid and CHIP Services at the Centers for Medicare & Medicaid Services (CMS). “The issue is a top priority for this administration and the [CMS] administrator.”

Hill said the new scrutiny was a trade-off for the administration’s decision to give states greater flexibility in how they run their Medicaid programs.

The increased scrutiny also was needed, he said, because the federal government is bearing a much larger share of the cost of coverage for these enrollees. The federal government paid 100 percent of expansion enrollees’ costs in the first three years before starting to taper the share down to 90 percent by 2020. The federal share of Medicaid funding for pre-expansion populations ranges from 50 percent to 83 percent.

The federal cost from 2016 to 2025 for the 11.2 million newly eligible enrollees is a projected $741 billion, Hill said.

The $1.2 billion spent on enrolling ineligible or potentially ineligible beneficiaries was a small fraction of the $596 billion that the Medicaid program spent in FY17. But it came on top of $37 billion in improper payments that came out of the federal share, according to a recent report of the Government Accountability Office. That was an increase from $29.1 billion in improper payments in 2015. Additionally, $20 billion in state Medicaid funding also was spent on improper payments, said Daryl Purpera, legislative auditor for Louisiana.

Eligibility Enforcement

The administration’s stepped-up eligibility enforcement includes, beginning in FY19, cuts to payment rates for states in which more than 3 percent of enrollees for whom services are paid were in fact ineligible. The penalty would apply if a state undertakes no “good faith effort to meet the threshold.”

The enforcement push drew a mixed response from members of Congress.

Some members said enrollment mistakes in themselves do not pose a major problem because an ineligible enrollee only becomes an issue if a provider actually incurs costs. But Purpera reminded them that state and federal agencies begin incurring costs immediately upon enrollment when the patient goes into managed care—which covers nearly all of the expansion population.

Purpera warned that ineligible enrollments may be much larger than is known because 25 states cannot use tax data to verify income claims.

But the focus on beneficiary eligibility drew some pushback.

“No one has said there is massive individual fraud going on because people are gaming the system in terms of their reported income,” said Rep. Gerry Connolly (D-Va.). “There may be examples of that and we want to perfect the system, but I want to go after the institutional problems first because that is where the real money is.”

Matt Salo, executive director of the National Association of Medicaid Directors, viewed the eligibility enforcement push as simply the other side of the coin of the Obama administration’s enrollment push.

“This administration has shifted that focus and is much more interested in ensuring that dollars spent are much more accountable—in general, but especially with respect to the Medicaid expansion, which I believe they are on record as saying isn’t the appropriate focus for Medicaid,” Salo said in an email.

State Focus

Regardless of what new initiatives the administration undertakes, there was bipartisan agreement that CMS needs to push the three states where it found ineligible enrollments to return the $1.2 billion.

OIG had recommended only a series of process improvements for the three states but no effort to recoup the money.

“Let me give you a recommendation: collect it,” said Rep. Mark Meadows (R-N.C.), who chaired the hearing.

However, any federal recovery effort from those or other states is a “long and uncertain process” and likely to involve court challenges and even legislative remedies from congressional representatives of the targeted states, said Doug Badger, a senior fellow at the Galen Institute.

A potentially bigger impact than the lost state funding would be disenrollment of ineligible enrollees. The 600,000 potentially or definitively ineligible beneficiaries represented nearly a quarter of the 2.6 million expansion enrollees that the three states had signed up at that point.

However, large-scale disenrollment is unlikely based on past eligibility enforcement actions, said Robin Rudowitz, an associate director for the Program on Medicaid and the Uninsured at the Kaiser Family Foundation.

Hospitals and other providers are unlikely to see any impact among enrollees who are found to be eligible for a different category of Medicaid coverage, given that the result would be merely a reshuffling of their coverage category, said Jocelyn Guyer, a managing director for Manatt. Even among the majority that OIG found ineligible for any Medicaid coverage, massive and quick disenrollment is unlikely since those people must still go through an evaluation process and appeals. 

Additionally managed care plans are unlikely to be impacted by federal efforts to recoup misspent money, as that is not typically done, Guyer said in an interview.

Other Actions

Another Trump administration policy that likely will impact states is the growing number of approvals for waivers that add requirements that able-bodied Medicaid enrollees work, take classes, or perform other actions to continue receiving their coverage. The administration has approved three such waivers and 11 more are under review, Hill said.

Some Medicaid advocates have worried that the work requirements are part of an effort to reduce Medicaid rolls, but hospitals have generally supported the initiatives due to the inclusion of other provisions.

“We definitely know from the history of Medicaid and the Children’s Health Insurance Program that paperwork and red tape like that is going to depress enrollment among people that are supposed to be enrolled, as well as among those states are trying to keep up with the work requirements,” Guyer said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, April 16, 2018