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A Medicaid Potpourri

Paragon Newsletter
Brian Blase
President at Paragon Health Institute

Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

One of the biggest health policy developments over the past year has been the removal of ineligible Medicaid enrollees from the program. As a result of misguided COVID-era policies, states did not conduct routine eligibility reviews and removals of ineligible recipients for more than three years. Typically, several hundred thousand people are added and removed from Medicaid every month because of normal economic factors (people gaining and losing jobs) and demographic factors (new births and people aging into Medicare). As a result of a lack of routine exits, enrollment swelled by 23 million people from early 2020 to the spring of 2023.

By the time eligibility redeterminations and removals began in April 2023, nearly 20 million ineligible enrollees were on Medicaid. A new study found that a stunning 30 percent of Medicaid enrollees in 2022 were unaware they were enrolled in the program. This week’s Paragon Pic shows that most of this year’s growth in exchange enrollment is due to the Medicaid unwinding. Today’s newsletter also reviews my testimony in Texas on the Affordable Care Act’s Medicaid expansion and highlights an important new study from Manhattan Institute’s Chris Pope on the problems with Medicaid waivers.

Unaware Medicaid Enrollees

On Monday, Drew Gonshorowski wrote about a new Health Affairs article estimating that 30 percent of Medicaid enrollees in 2022 did not know they were enrolled in the program. As Drew discusses, “The main reason for the explosion in Medicaid and unaware program enrollees: states did not conduct eligibility reviews for more than three years. This boosted insurers’ bottom lines, but it wasted real resources that could have gone to those who need Medicaid while inflating federal deficits.”

The Procedural Disenrollment Myth

The Biden administration, abetted by many in the media, issued dire warnings about people removed from Medicaid during the unwinding as victims of “red tape.” In December 2023, the Biden administration sent letters to Republican governors of nine states pressuring them to keep ineligible enrollees on the program.

The term “procedural disenrollment” has been used to frame removals as paperwork issues leading to a large number of eligible enrollees removed from the program. The truth is that many enrollees were unaware they were enrolled because they had other coverage, and these enrollees have no incentive to take the time to return forms to the government to update their information. The vast majority of those being disenrolled are not becoming uninsured, and Medicaid retroactive eligibility protects eligible enrollees who are removed.

Some States Still Have Many Ineligible People on Medicaid

Despite redeterminations and removals over the past year, Medicaid enrollment remains nearly ten million people above spring 2023 levels and there are still likely around this many ineligible enrollees. As a result of redeterminations, the average state’s Medicaid enrollment is down about 15 percent since early 2023. Several states are significantly lagging, however. In fact, as of May 10, 2024, six states—Hawaii (enrollment is actually up 0.2 percent), Maine (down 1.8 percent), Oregon (down 3.4 percent), Nevada (down 4.7 percent), California (down 6.2 percent), and Maryland (down 6.3 percent)—are collectively wasting more than a billion dollars each month on ineligible enrollees because of relatively few people being removed from Medicaid thus far. If these six states had removed the average of 15 percent of Medicaid enrollees, two million fewer people would be on Medicaid today.

Exchange Enrollment Increase Driven by Medicaid Unwinding

Between the 2023 and 2024 ACA open enrollment periods, 5.1 million more people selected an exchange plan. This week’s Pic shows that 77 percent of this increase came from enrollees who lost Medicaid during the unwinding.

Medicaid Unwinding Drove 77 Percent of Increased Exchange Plan Selection in 2024
 

As a result of increased subsidies to insurers contained in the American Rescue Plan Act and the Inflation Reduction Act, people making under 150 percent of the federal poverty level qualify for a fully-taxpayer subsidized benchmark plan for which they would pay almost no cost-sharing. The larger exchange subsidies are driving exchange enrollment from the Medicaid unwinding population.

Against Medicaid Expansion

Out of 14 witnesses, I was the only non-Texan to testify before the Texas Senate Committee on Health and Human Services last week. One of the main topics of my testimony was Medicaid expansion—what would likely happen if Texas expanded as well as the lessons from other expansion states. Here is a 6-minute clip on what I said on Medicaid expansion. My full written testimony is here. I also testified about health reforms the state should consider, such as reforming its state employee health plan. Don’t Wait for Washington, Paragon’s state health reform book, has eight ideas for state health reformers.

Restraining Medicaid’s Budget Busting Waivers

Kudos to Chris Pope of the Manhattan Institute for his new report analyzing the problems with Medicaid waivers. As Chris details, a staggering 75 percent of all Medicaid spending occurs through waivers. As currently structured, Medicaid waivers reduce financial accountability. From Chris’s piece:

[T]he voluntary nature of the arrangement allows states to participate only when they believe that it allows them to get more money from the federal government.

Waivers serve as a one-way ratchet to grow Medicaid spending. Unlike “shared savings” arrangements, waivers require that states spend all the “savings” that are generated. As a result, they eliminate any incentive that states might have to reduce Medicaid expenditures in a way that reduces the program’s costs to federal taxpayers.

Chris recommends that states adopting Medicaid waivers should be subject to a single overall cap on federal Medicaid funding. A cap on Medicaid funding would address the primary problem with the Medicaid program—the open-ended federal reimbursement of state expenditures that leads to incentives to misspend and create financing gimmicks and schemes to maximize the receipt of federal funds.

 

All the best,

Brian Blase
President
Paragon Health Institute

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