CMS suspects auto-renewal process at fault for wrongful Medicaid disenrollments

By Noah Tong / August 30, 2023

In a letter sent to all states (PDF), the Centers for Medicare & Medicaid Services (CMS) said it is requiring states to determine whether an eligibility systems issue is to blame for disenrolling adults and children from Medicaid or the Children’s Health Insurance Program (CHIP) despite many terminated individuals still being eligible for coverage.

CMS said in the letter that it believes eligibility systems, which utilize auto-renewals (otherwise known as ex parte renewals), have been programmed incorrectly and are conducting renewals at the family level but not at the individual level.

The agency said sometimes children have higher eligibility thresholds than their parents do, so they are more likely to be eligible for Medicaid or CHIP than their parents are. For most states, Medicaid and CHIP eligibility is set at 255% of the poverty level, but parents are covered up to 138% of the poverty level, according to Georgetown University Center for Children and Families Executive Director Joan Alker in a statement.

“CMS has learned of additional systems and operational issues affecting multiple states, which may be resulting in eligible individuals being improperly disenrolled,” according to a news release from CMS. “These actions violate federal renewal requirements and must be addressed immediately.”

States have resumed the regular processes for Medicaid and CHIP enrollment after the pandemic-era pause was lifted earlier this year. If a state finds that CMS’ assumption is correct, they must pause procedural disenrollment for impacted individuals, reinstate coverage, implement mitigation strategies to prevent the situation from arising again and fix systems and processes moving forward.

"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," said Alker. "A functioning ex parte process is essential to a smooth process for children. Some states, most notably Texas, are barely doing any ex parte determinations at all, which is a related challenge. 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."

Alker added that the issue is likely more severe in states that have yet to expand Medicaid under the Affordable Care Act (ACA) because there is greater disparity in income eligibility between children and their parents. Approximately half of children in the U.S. are covered by Medicaid or CHIP, and it's projected that three-quarters of children that will lose Medicaid coverage are still eligible.

A new analysis from the Urban Institute underscores the importance of stopping inappropriate disenrollments. Its findings show that eligible-but-not-enrolled individuals are more likely to face obstacles in regard to health outcomes when compared to low-income people with private insurance.

Just 37% of adults not enrolled in Medicaid report having a usual source of care versus 69% of Medicaid enrollees. These adults are much more likely to delay care and not visit their doctor as well as to spend more on out-of-pocket healthcare costs.

“Not surprisingly, those who are eligible for Medicaid but not enrolled spend more for care and have more unmet needs than their counterparts who are enrolled,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, in a news release. “In the context of ongoing Medicaid redetermination, this suggests the possibility of significant financial and health outcomes resulting from administrative churn.”