Medicaid, the federal-state entitlement for the poor, now provides health insurance to more than one in four Americans. Enrollments surged after the Affordable Care Act (ACA) was implemented, declined in 2018 and 2019, then jumped during the pandemic by about a third, or more than 23 million people. The reason for the surge was not increased poverty leading to new enrollments but rather a statutory ban on states’ use of Medicaid’s redetermination process to remove ineligible recipients. That ban has now been lifted, but advocacy groups worry that some people might lose government coverage and be forced to reapply or get private insurance; they worry less about how the government is spending tens of billions on ineligible beneficiaries.
Congress’s March 2020 Covid relief package—the Families First Coronavirus Response Act—temporarily raised the federal government’s share of total Medicaid costs by 6.2 percent but prohibited states that accepted the extra federal money from redetermining Medicaid eligibility and removing ineligible people from the rolls until the public-health emergency ended. Unsurprisingly, states took the extra cash, and enrollment swelled due to the continuous-enrollment requirement.
States normally conduct periodic redeterminations of Medicaid recipients’ eligibility to account for evolving circumstances such as new employment, changes in income, altered family status, moves out of state, and duplicate coverage. The government’s Medicaid and CHIP Payment and Access Commission found, for example, that 6 percent of Medicaid beneficiaries in the pre-pandemic years 2017–2019 were enrolled in multiple states. A survey of pre-pandemic Medicaid enrollees by the University of Chicago’s National Opinion Research Center (NORC) reported that 14 percent of respondents indicated more than one type of coverage. That figure has undoubtedly grown during the last three years as enrollees got new jobs and employer-provided insurance, acquired non-group coverage, or moved to another state, all while staying on the Medicaid rolls.
The three-year accumulation of ineligible Medicaid beneficiaries can now, finally, be ended. The Consolidated Appropriations Act of 2023, enacted at the end of last year, delinked the continuous-enrollment provision from the public-health emergency, ending the ban on redeterminations on March 31, 2023. States will have 14 months to complete the process. Five states—Arizona, Arkansas, Idaho, New Hampshire, and South Dakota—have already started. The enhanced federal spending percentage will continue but will phase out over the remainder of this year.
No one knows exactly how many people will lose Medicaid coverage once redeterminations start, but the number will be substantial: the Kaiser Family Foundation estimates 5.3 to 14.2 million individuals, the Department of Health and Human Services puts the figure at 15 million, and, most recently, the Urban Institute predicted 18 million. Whatever the ultimate number proves to be, the whole point of making eligibility determinations is to ensure that those receiving public benefits actually qualify for them. Multiple estimates make it clear that the majority of people who will be disenrolled are no longer eligible for the Medicaid welfare benefit.
The problem of ineligible enrollees receiving coverage is not simply that some people receive health insurance to which they are not entitled. About 90 percent of Medicaid beneficiaries are enrolled in some form of managed care. Most are enrolled in comprehensive managed-care organizations that receive a per-member, per-month payment to provide services. As a result, states are making monthly premium payments for people with duplicate coverage from employer insurance, insurance in another state, or enrollment in a non-group plan. Insurers are receiving payments for beneficiaries who will likely never use any services.
No wonder trade associations like the American Health Care Association and the National Center for Assisted Living (whose 14,000 members receive revenue from Medicaid) lobbied to extend the public-health emergency and its ban on eligibility redeterminations, or that industry groups, led by America’s Health Insurance Plans, are cautioning that Medicaid redeterminations will result in coverage lapses.
Nearly all those no longer eligible for Medicaid will qualify for other coverage through employer plans, subsidized ACA exchange plans, or other non-marketplace insurance. The Urban Institute says that more than half of those disenrolled will have employer coverage, about 1 million will move to the non-group market, and about 3.2 million children will transition from Medicaid to the government-run Children’s Health Insurance Program.
The Urban Institute estimates that about one in five of those disenrolled (3.8 million people) will become uninsured at the end of the redetermination period. But it acknowledges that 40 percent of them will qualify for low- or no-cost coverage on the heavily subsidized ACA insurance exchanges. NORC says that the Urban Institute likely overestimates the number that will remain uninsured because it did not account for the expansion of eligibility for, and the increased generosity of, ACA marketplace subsidies that took place during the pandemic—changes that will likely boost enrollment in marketplace exchange plans.
The HHS report raises a different problem: that large numbers of people who remain eligible for Medicaid will lose coverage due to administrative barriers to re-enrollment during the redetermination period. This so-called administrative churn, where enrollees have difficulty navigating the renewal process and states are unable to contact them due to a change of address or other bureaucratic issues, frequently resulted in gaps in coverage during the pre-pandemic period. This will probably not be as big an issue as feared, though. The Kaiser Family Foundation recently reported that all states have taken steps to update enrollee contact information and institute new administrative measures to diminish churn and mistaken Medicaid terminations.
The Covid-19 pandemic led to unprecedented government expansion into all facets of social and economic life. Many of these interventions were wasteful and counterproductive. The time has come to roll them back. There is no justification for continuing a wasteful and unnecessary expansion of the government’s Medicaid program.
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