American Experiment opposes Biden’s proposal to “streamline” Medicaid eligibility

Proposed rule to make it easier to enroll in Medicaid would promote fraud and abuse, increase costs, and block pathways to independence

Earlier this week American Experiment filed public comments in opposition to a rule proposed by the Centers for Medicare & Medicaid Services (CMS) which aims to make it easier to enroll in and retain Medicaid coverage.

Rather than “streamlining” Medicaid eligibility for people who are truly eligible, the proposal will make it easier for people who lose eligibility to stay on the program and undercut state efforts to protect the financial integrity of the program. Most troublesome, people who improperly stay enrolled will be delaying their journey to a better, more independent life.

Proposed rule bans states from administering reasonable eligibility verifications

Medicaid is a federal program that provides health coverage programs for the disabled, elderly, children and pregnant women, and low-income working-age adults. These programs provide an important safety net for people who otherwise cannot afford health coverage.

Unfortunately, this safety net is beset with waste, fraud, abuse, and mismanagement which costs taxpayers billions of dollars every year. According to CMS’s own Payment Error Rate Measurement (PERM), the overall Medicaid improper payment rate reached 21.69 percent in 2021 at a cost of $98.72 billion. This is higher than the already troubling pre-COVID error rate of 14.9 percent in 2019.

State budgets are on the hook for these costly errors. As American Experiment noted in comments, “states have a stronger financial incentive than the federal government for getting enrollment determinations correct because nearly every state must balance their budgets.” As we further explained: “That means more spending on Medicaid will mean less spending on other priorities or higher taxes on residents.”

Nonetheless, CMS proposes to ban Minnesota and every other state from administering reasonable Medicaid eligibility verifications. This includes a ban on the following verifications:

• Performing eligibility reviews more than once year;
• Conducting in-person eligibility interviews;
• Using returned mail with an in-state forwarding address as an indicator of a change in eligibility;
• Applying deadlines less than 90 days for providing documents to verify eligibility;
• Making follow-up requests to verify citizenship or available financial resources when certain electronic data sources provide evidence of eligibility; and
• Continuing the use of stronger eligibility determination processes for the more expensive disabled and elderly populations.

In addition to banning states from these verification activities, the proposed rule includes several other proposals to make it easier to gain and retain Medicaid eligibility.

Rule would add billions to state budgets

Altogether, CMS estimates these proposals to loosen Medicaid eligibility verifications will increase state spending by $39 billion over five years. Assuming this additional spending for each state is proportional to current spending, this would add $818 million to Minnesota’s Medicaid spending over the next 5 years.  Because this rule directly impacts Minnesota’s budget, American Experiment’s comment letter opposed all changes in the rule that would limit state flexibility.

Minnesota needs stronger, not weaker verification processes

In the past, CMS refused to publish state-level improper payment rates. However, this year CMS finally released historical state improper payments rates due to a Freedom of Information Act (FOIA) lawsuit filed by the Americans for Prosperity Foundation. This revealed that Minnesota’s overall improper payment rate was 18.6 percent in 2019 at a cost of $1.3 billion. This rate is nearly 25 percent higher than the national rate. More troubling, the rate is substantially higher than the 5.8 percent improper payment rate CMS estimated for Minnesota in 2013.

Accurate Medicaid enrollment determinations is an important payment control activity to help reduce improper payments. Before the pandemic hit in 2020, Minnesota had just begun a new periodic data matching (PDM) program to identify beneficiaries who may no longer qualify for their program based on available electronic data.

Two reports from September 2019 and September 2020 confirmed that thousands of ineligible Minnesotans were enrolled in Medicaid.  As a result, these PDM verifications removed 34,102 ineligible people from Medicaid between February 2019 and February 2020. It’s impossible to accurately estimate how much money this saved without more information. However, the total per-enrollee Medicaid expenditure in Minnesota was $11,829 in 2019. Assuming each of the people removed represents this average expenditure and would have stayed enrolled for a year, the PDM process saved Minnesota and the federal government around $400 million dollars.

The U.S. Department of Health and Human Services Office of Inspector General also uncovered improper payments on behalf of dead people in Minnesota. In 2019, HHS OIG audited Minnesota’s Medicaid payments to managed care organizations after a beneficiaries death. They identified $3.7 million in unallowable capitation payments which should have easily been identified by state data systems.

All of this data showing the thousands of ineligible enrollees and millions in improper payments clearly demonstrates that Minnesota needs a stronger verification process. Yet, CMS is proposing to weaken the state’s Medicaid verifications.

Blocks pathways to independence

Some people need lifelong support from Medicaid due to disability. However, a large portion of Medicaid enrollees, especially working-age adults, need Medicaid only temporarily. Making it easier for ineligible people to retain Medicaid, as this CMS rule would do, is not compassionate. To the extent people begin to depend on Medicaid on a more long-term basis, they are very likely delaying the sort of self-improvement that’s necessary to improve their lives. For eligible people, this means Medicaid should include programs that encourage people to pursue self-improvements, such as education or meaningful work. For ineligible people, this means Medicaid should ensure they are moving beyond Medicaid and then getting the best help to create a better life.

The proposals in the CMS rule do neither. Instead, they further trap people in impoverished dependence on Medicaid and, at the same time, waste billions of state and federal tax dollars. Therefore, to protect the financial integrity of the Medicaid program and to ensure people who are able to move beyond Medicaid get the best help to create a better life, American Experiment urged CMS to not adopt the proposals in their rule that weaken or remove state flexibility.