As Congress Sunsets a Covid-Era Medicaid Program, Millions Could Lose Coverage

Millions of low-income people could begin losing their Medicaid coverage as soon as April after Congress in last month’s $1.7 trillion omnibus bill lifted a Covid-era ban on states that prevented them from removing people from the health care program.

But in what Medicaid experts see as a positive step, lawmakers put in place several requirements states must meet before removing recipients. They also opted to gradually sunset the roughly $90 billion in federal Medicaid funding states have been receiving the last two years instead of simply shutting it off. Experts agree that these provisions will lead to less people losing coverage by mistake and will ease the pressure on states to quickly remove people from the rolls.

In the early days of the pandemic, Congress passed a coronavirus relief bill that prevented states from kicking people off Medicaid. To help pay the cost for states, the bill increased the federal government’s share of Medicaid, known as the Federal Medical Assistance Percentage, or FMAP, by 6.2%.

Both the ban and additional funding were set to end when the Covid-19 public health emergency was lifted. Instead, it has continually been extended, most recently in November until Jan. 11. This has left states unsure of when they will have to take on the mammoth task of reevaluating who among the 90.6 million people on Medicaid will still be eligible for the program.

“There's been a lot of uncertainty about how long this will be in place,” said Robin Rudowitz, vice president of the Kaiser Family Foundation and director of the health policy organization’s Program on Medicaid and the Uninsured. “It's been hard for states to plan, not knowing exactly what the end time is.”  

The federal spending law now answers that question. Starting April 1, Medicaid offices will have to begin determining who on the rolls is eligible. 

“Getting a set date is really helpful. It gets us out of this kind of guessing around the future of the public health emergency,” said Jack Rollins, director of federal policy for the National Association of Medicaid Directors. “That allows states to begin making real concrete plans around what operationally needs to happen in advance of that date and after that date.”

Rollins says Medicaid directors are waiting for the Centers for Medicare & Medicaid Services to issue specific guidance on implementing the requirements in the federal spending law, like whether states have to give recipients 60 days notice before removing them from the program. The law does require states to make a “good faith effort” to reach people, including reaching out in a way other than by mail to let them know they have to reapply before kicking them off of Medicaid.

Determining eligibility can be complicated for a number of reasons. Medicaid officials and health experts acknowledge that notices asking people to verify their income and other information can get lost in the mail. Addresses and phone numbers for enrollees can be out of date. There can also be language barriers. 

Black and Latino enrollees are particularly at risk of having a difficult time with the process, according to an Urban Institute report, which looked at the plans of 11 states. They are more likely to lose housing, leading to address and phone number changes that can cause difficulties reaching them.

If states do not make a good faith effort to notify recipients of the need to re-enroll, the U.S. Department of Health and Human Services can require states to submit a plan to come into compliance. If a state does not submit a plan, the department can forbid them from removing people from Medicaid and can fine them $100,000 for every day they are not in compliance.

“This basically stops a state from saying, ‘Oh, I got this piece of returned mail. I'm just going to send out a termination notice,’” said Rudowitz.

The federal spending law will also gradually sunset the roughly $90 billion a year in increased federal Medicaid funding states have been receiving. Instead of it coming to a screeching halt, the federal government will continue to pick up the additional 6.2% of the cost through March 31. The additional aid will drop to 5% in the quarter that ends June 30, to 2.5% in the quarter that ends Sept. 30, and then to 1.5% through the end of the year.

Not ending the federal aid in April could lead some states to take the full year to reevaluate all Medicaid recipients, said Tricia Brooks, a professor at the Georgetown University Center for Children and Families. “It does provide an incentive for states to not barrel ahead too quickly.”

The problem with “front-loading” or moving quickly, according to Brooks, is that those state’s Medicaid offices will be overloaded at a time when they are already short-staffed.  According to the National Association of Medicaid Directors, 1 in 4 state Medicaid agencies have more than 20% of their positions unfilled.

Another reason not to rush is that states could lose the additional federal funding if they fail to meet reporting requirements. Under the law, states will have to submit monthly reports to HHS beginning in April with information like how many people were renewed, how many were dropped, and how many were able to get health care coverage through the subsidized Affordable Care Act insurance. Should they not file a report, a state could lose as much as one percentage point of their enhanced FMAP. 

Brooks surveyed state Medicaid directors’ plans for the reevaluations with the Kaiser 

Family Foundation last January. The survey had found that 41 states were planning to complete their reevaluations in nine to 12 months. But other states were planning to move more quickly. Texas, for example, has been compiling a list of people who are no longer eligible, and will likely move quickly to get them off of the rolls once they can on April 1. And Arkansas has a law that requires the state’s Medicaid program to complete the reevaluations and return to normal operations within six months.