Cleaning Up Medicaid Rolls Is Common Sense

O n May 24, the Congressional Budget Office released estimates that 15.5 million people will lose Medicaid over the next two years. The reason: Twenty percent of Medicaid enrollees are ineligible for the program because states have not conducted eligibility reviews for more than three years.

Medicaid is a welfare program only for people with low income. But in the March 2020 Covid legislation, Congress increased federal Medicaid payments to states conditional on states halting eligibility reviews for program enrollees. Starting in April 2023, the higher federal payments began phasing down (they will end by the end of the year), and states could begin cleaning up their Medicaid rolls.

Most of the ineligible recipients make too much money to qualify, and nearly 5 million are concurrently enrolled in employer-provided coverage. Ensuring proper enrollment is important for preserving resources and access to care for those eligible as well as for taxpayers who finance Medicaid. Federal improper payments in Medicaid reached $99 billion in 2022.

States need to remove people who provide information that shows they are no longer eligible as well as people who choose not to respond to states’ requests for information. Some progressives are decrying state efforts to redetermine eligibility, particularly in states such as Arkansas and Florida, calling the process “scary” and “a grave concern.” They are accusing these states of removing coverage from people who remain eligible but have been entangled in “red tape” and are calling for states to pause redeterminations.

The progressives’ complaints leave out two crucially important elements. The first element is Medicaid retroactive eligibility. If an uninsured person goes to a doctor or hospital and he or she is eligible for Medicaid, they can immediately enroll, and the program will pay for those services. Moreover, Medicaid will pay for any of their medical expenses incurred in the prior three months. Most hospitals have units dedicated to helping people enroll in Medicaid, and they are able to presumptively enroll people in the program. Retroactive eligibility and hospitals’ ability to quickly enroll people in Medicaid means people incorrectly removed now can re-enroll and still have up to three months of their past expenses paid by Medicaid if a need arises.

Second, the federal government requires states to make re-enrollment easy. States are required to send enrollees re-enrollment forms with much of the information already filled out, and states are dedicating resources to educating enrollees about this process. Enrollees only need to update their information and send the form back in. Assuming they update their information, return the form, and still meet eligibility requirements, they remain enrolled.

People who don’t update their information and return the paperwork are generally demonstrating one of two things. First, many of them don’t believe they are still eligible. Those who think that are probably right. For example, the 5 million Medicaid enrollees with employer-provided coverage (which generally precludes them from being eligible for Medicaid) are acting rationally by not returning the state’s paperwork.

Second, it’s also the case that many Medicaid enrollees don’t believe Medicaid is worth that much. They are demonstrating the low value they receive from the program by not taking the time to update their information and return the form. One prominent study estimated that the average enrollee may obtain as little as 20 cents of value for each $1 of Medicaid spending on their behalf. Most of the benefit from expanded Medicaid is captured by hospitals and insurers.

Why are progressives spreading so much panic about Medicaid redeterminations, particularly since retroactive eligibility protects people who are eligible? Ironically, doing so mostly serves the interest of health insurers, the main beneficiaries of improper Medicaid enrollment. Health insurers have been receiving monthly payments from the government for millions of ineligible enrollees, some of whom do not even know they are enrolled in the program. Insurers’ profits soared with Obamacare’s expansion of the program and have further increased with the Covid-related Medicaid boost. Insurers are increasingly relying on government for their revenues. Progressives and insurers are a modern Baptists and bootleggers story.