Medicaid Eligibility Reviews Will Resume in April

And that’s a good thing. But we need longer-term solutions to fix Medicaid.

Medicaid was never intended to be the largest health insurance program for Americans. It beggars belief that almost 100 million Americans are enrolled in Medicaid, a program originally intended to cover the most vulnerable Americans. Why do the program rolls keep growing even though we have become a more prosperous nation than we were in 1966? Here at the Open Health Project we believe that Medicaid must be strengthened to provide coverage and access to quality healthcare to the most vulnerable and a temporary source of coverage for those who fall on hard times. My colleagues Markus and Liam address the hindrances to these narrow and reasonable goals, drawing from their recent op-ed in The Wall Street Journal.

– Kofi Ampaabeng

Background and recent changes around eligibility reviews

At the beginning of the pandemic, Congress gave states larger-than-usual subsidies for their Medicaid spending on one condition: States weren’t allowed to check enrollees' eligibility or disenroll ineligible people from Medicaid as long as the public health emergency (PHE) was in effect. In less than three years, this policy expanded Medicaid by 20 million people, comparable to that from the Affordable Care Act but receiving a fraction of the attention. Medicaid rolls are now at their highest levels in history, covering almost 100 million Americans.

Given the growth in Medicaid spending resulting from this policy, lawmakers and experts began pushing for states to be able to check eligibility and remove ineligible beneficiaries. We pointed out in the pages of The Wall Street Journal that this provision was the main reason for the PHE remaining in place long after the pandemic had come under control. A group of 25 Republican governors wrote a letter to President Joe Biden in December to ask for the PHE to end in April so they could begin removing ineligible beneficiaries from the rolls. In the end, the omnibus spending bill granted their request: Starting April 1, states can begin redetermining Medicaid eligibility and removing people who no longer qualify.

What will happen when people are pushed off the rolls?

The media have been stoking fear over the fate of those who will lose Medicaid coverage once states start conducting eligibility checks. However, health policy experts have estimated that only a small fraction of those who become ineligible for Medicaid will find themselves without insurance. The liberal-leaning Urban Institute published a study in December that asserted:

“We estimate that if the PHE expires in April 2023, 18.0 million people will lose Medicaid coverage in the following 14 months. Of those 18.0 million people,

• about 3.2 million children are estimated to transition from Medicaid to separate Children’s Health Insurance Programs (CHIPs), …;

• about 3.8 million people will become uninsured;

• about 9.5 million people will either newly enroll in employer-sponsored insurance after losing Medicaid or transition to employer-sponsored insurance as their only source of coverage after being enrolled in both employer-sponsored insurance and Medicaid sometime during the PHE;

• and more than 1 million people will enroll in the nongroup market, most of whom will be eligible for premium tax credits in the Marketplace.”

In short, the majority of those losing Medicaid are expected to quickly transition to private coverage, mainly through their employer. A sizable portion of those remaining are children who will qualify for public coverage through CHIP. Only 3.8 million people – about one-fifth of all those projected to lose Medicaid – are likely to wind up uninsured.

This situation should inform future Medicaid reforms

Medicaid’s continuous coverage requirement was passed in March 2020, in the face of a highly uncertain future and an unprecedented pandemic. At the time it was reasonable for Congress to put safeguards in place to ensure continuous coverage for Medicaid beneficiaries, but it’s long been clear the policy was maintained far longer than warranted by the pandemic or its economic disruptions. Moreover, the safeguards were a blunt instrument, allowing millions of higher-income people – who would have been able to purchase their own private plans, often with ACA subsidies – to receive Medicaid coverage for nearly three years. If Medicaid’s fiscal sustainability and ability to fulfill its core mission are to be protected, its slide toward becoming a middle-class entitlement must be halted.

Medicaid was intended as a welfare program, a temporary backstop until people get back on their feet and find more reliable, generous, and adequate/high-quality health insurance through employers or on the private market. And while it makes sense for people with disabilities to stay on the program for a long time, research finds that many able-bodied adults also stay on the Medicaid for years on end, sometimes decades. This is a worrisome trend that points to the lack of economic mobility available to many program participants. The problem is exacerbated by the Medicaid cliff, which discourages people from work due to fear of losing coverage.

How to improve Medicaid

We propose three reforms.

1. Rather than a steep cliff where someone is 100% covered at one income level, but loses coverage entirely if they earn 1 dollar more than the limit, Medicaid coverage should be phased out through gradually increasing monthly premiums and copayments as people earn more. This is similar to what most other means-tested programs do, most notably food stamps and cash welfare. Some states are already experimenting with different approaches. For example, Maine, North Carolina and Utah have adopted transitional Medicaid plans that extend coverage for up to 12 months for families that become ineligible for income-based Medicaid due to higher income.

2. Another solution is to allow people who become ineligible due to increased earnings to purchase Medicaid coverage with income-adjusted premiums, much like private plans on the ACA exchanges. As many as 46 states have implemented such programs for people with disabilities and have successfully allowed people to find employment and earn more. Similar policies could be implemented for a broader set of Medicaid recipients.

3. Lastly, some states have explored work requirements, where non-disabled beneficiaries have to work or volunteer in order to retain Medicaid eligibility. With the right policies, such requirements can encourage people to develop the skills and initiative to climb out of poverty.

It makes sense to worry about the people who are going to lose Medicaid eligibility, but let’s remember that this reflects the fact that the economic and public health emergency we faced in March 2020 is over, and that the majority of those losing Medicaid coverage will continue to have health insurance. Moreover, let’s take this opportunity to reform Medicaid and implement policies that allow an ever-greater number of people to become financially independent and upwardly mobile, which could allow millions more to get back on their feet and into higher-quality health insurance.

The end of Medicaid’s continuous coverage requirement brings it closer to its original statutory mandate: “To furnish rehabilitation and other services to help such families and individuals attain or retain capability for independence or self care.”