CMS hits the panic button

Threatens state Medicaid agencies with sanctions if eligible kids, qualified families are thrown off the rolls

The end of COVID-19 public health emergency required state Medicaid agencies to resume annual eligibility reviews. At mid-year, at least 4 million of the 94 million people in the program had been disqualified, mostly for failure to fill out the necessary paperwork.

It looks like that number has skyrocketed in the past two months, confirming analysts’ worst fears. The Kaiser Family Foundation predicted as many as 17 million people could lose coverage after the annual re-enrollment process was reinstated.

The Centers for Medicare and Medicaid Services is clearly concerned. On Wednesday, its top Medicaid official sent a letter to program directors in every state and the District of Columbia warning that failure to maintain coverage for people who remain eligible, especially children who are also eligible for the Children’s Health Insurance Program, could lead to “withholding a state’s enhanced federal funding.”

Earlier this month, I wrote a piece arguing that every insurer in the U.S.’s fragmented health insurance system, whether government- or privately-run, should institute an automatic enrollment and re-enrollment system. Automatic enrollment would be especially useful for individuals and families who lose coverage when their income, employment or age status changes.

It also would be a boon to the millions of people who qualify for Medicaid but never take advantage of the program. Ditto for the millions of individuals offered health insurance at work but never sign up. It’s behavioral economics 101: Opt-out programs do a far better job at enrolling almost everyone eligible than opt-in programs, which is what all health insurance programs other than Medicare use.

Uninsured rate may return to pre-pandemic levels due to Medicaid re-qualifications.

The CMS letter highlighted how states could avoid penalties by creating an automatic renewal program. It recommended using readily available income data from their state unemployment bureaus or other sources.

Medicaid director Daniel Tsai aimed most of his fire at programs that use failure to fill out necessary paperwork as the reason for non-renewals. “For any multi-member household that does not return a form, the state must review eligibility for all children and household members to identify and manually renew coverage for those who remain eligible,” Tsai’s letter said.

It will be interesting to see how the 10 Republican-run states that failed to expand Medicaid to include people earning up to 137% of the poverty level respond to this latest federal initiative. Those states, like the majority that expanded, have benefited from the 6.2 percentage point bump in the Federal Medical Assistance Percentage (FMAP), which is normally a 50-50 split before adjustments.

But that extra federal support, enacted in response to the pandemic emergency, goes away next January, which makes the threatened sanctions for illegal dis-enrollment less than robust. Tsai wrote that CMS will first ask states that dis-enrolled otherwise qualified individuals to submit a “corrective action plan.” If they fail to submit or implement the plan, it could lead to fines and “additional penalties, including but not limited to disqualification of the state from eligibility for the temporary FMAP increase.”

Hmm. Why not threaten to lower their FMAP percentage below the normal amount for a period of time? That would get their attention far better that threatening to take away something that will probably already be gone by the time sanctions are imposed.

(A warm welcome to all the readers who signed up for GoozNews today after receiving an email from Peter Grant, the former legal counsel for the American Medical Group Assn. I hope you enjoy GoozNews, and find it worthwhile.)