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New Paragon Study: The Harm of Delaying the Disenrollment of Medicaid Ineligibles

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.

This morning, Paragon has released a new study, The Cost of Good Intentions: The Harm of Delaying the Disenrollment of Medicaid Ineligibles, that I authored with Drew Gonshorowski and Niklas Kleinworth. These harms include fewer resources for those eligible for Medicaid, fewer resources for other public priorities like education, and higher state taxes and federal deficits. This study calculates the monthly cost, both overall and just to states, of the 18 million ineligible COVID Medicaid recipients, and estimates the respective savings of states pursuing a more efficient redeterminations process that more quickly preserves Medicaid for those who are eligible.
Here are the key takeaways:

  • As a result of federal and state COVID policies, there were roughly 18 million ineligible Medicaid enrollees on the program as of April 1, 2023, at an annualized cost of more than $80 billion. Paying for ineligible enrollees pulls resources away from other public priorities and primarily benefits health insurance companies that administer Medicaid.
  • States could have begun removing ineligible enrollees in April. Some states started the redetermination process early and are efficiently processing removals of ineligible enrollees, but other states are acting slowly and will waste resources on Medicaid coverage for individuals who have moved out of state, have private insurance, have died, or earn too much income.
  • Total Medicaid savings would be $41 billion and state savings would be $12 billion if all states pursued an efficient redetermination process.
  • There are significant protections for enrollees mistakenly disenrolled, including three-month retroactive eligibility, hospital presumptive eligibility, and a robust appeals process.

Today’s study follows a June 27 Medicaid redeterminations briefing Paragon hosted with Janet Mann, Arkansas Deputy Secretary of Health and State Medicaid Director, and Kelly Garcia, Director of Iowa’s Health and Human Services Department. Mann and Garcia gave vital information about the redetermination process, including that most people being removed have obtained a job with workplace coverage or make too much income to be eligible for Medicaid.
They both described how their states have made retaining Medicaid relatively easy for those who remain eligible. States must send re-enrollment forms with much of the information already filled out, and they must make numerous attempts using different modalities to contact enrollees. Enrollees simply need to update their information and return the form. If they update their information, return the form, and still meet eligibility requirements, they remain enrolled.
Many people are not returning the forms, leading to so-called “procedural removals.” This is not surprising given that so many Medicaid enrollees have other coverage or simply don’t place much value on Medicaid coverage. Most of the Medicaid cases closed in Florida were people who had not used Medicaid in the past year or had other coverage—an indication that insurance companies have reaped windfalls from the huge number of ineligible enrollees.
Three state actions protect limited resources for those eligible Medicaid recipients or for other purposes: 1) beginning redeterminations earlier, 2) prioritizing reviews of those most likely to be ineligible, and 3) processing a greater number of redeterminations each month.
We estimate that Arkansas, Iowa, and Florida, respectively, will save $122 million, $67 million, and $718 million from a more efficient redeterminations process. Factoring in federal savings raises those respective amounts to $601 million, $280 million, and nearly $1.9 billion.
States with less efficient redetermination processes will waste significant resources on ineligible Medicaid recipients, largely through payments to health insurers managing Medicaid. California, New York, and Illinois will bear respective costs of $1.3 billion, $902 million, and $371 million from an inefficient redeterminations process. Including federal spending on ineligible enrollees raises these amounts to $4.2 billion, $2.9 billion, and $1.5 billion.
As discussed in a May Paragon report, Pandemic Unwinding: How States Should Clean Up Their Medicaid Rolls, most people who transition off of Medicaid will gain employer coverage and almost no one who loses Medicaid will lack access to either an employer plan or heavily subsidized exchange coverage. This Paragon report also dispelled the myth that large numbers of eligible recipients will be harmed by states inappropriately removing them from Medicaid during the redeterminations process. I summarized the key protections for eligible Medicaid enrollees in a National Review op-ed.

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.

States should not be deterred from taking actions to preserve the program only for people who are eligible, resources for other state priorities, and to protect the taxpayers who work hard to ensure a safety net exists for those who genuinely need it.

All the best,
Brian Blase
Paragon Health Institute

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