Medicaid Cost, Enrollment Ballooned During Pandemic: Study

Montana, for one, is taking advantage of a provision in the federal omnibus bill passed December 23 to remove ineligible people from its Medicaid roll, a move that could potentially save the state millions of dollars.

Under the public health emergency, states have been limited to remove ineligible people for 12 months, regardless of increases in their income.

“That has led to, in all states including Montana, strong growth in Medicaid enrollment,” said Josh Poulette, the legislature’s senior fiscal analyst in a budget hearing January 11, as reported by the Independent Record. “There’s a door in, but there is no door out.”

The omnibus bill allows states to begin the “redetermination process” to remove people who no longer financially qualify for Medicaid after an earnest attempt to contact them

Study Affirms Growth Explosion

The Affordable Care Act (ACA) and COVID-19 pandemic policies vastly expanded Medicaid and enrolled millions of ineligible people, a new study found.

More than 90 million individuals are enrolled in Medicaid, the joint federal-state health care program for the poor, including millions who don’t qualify, says Brian Blase, president of the Paragon Health Institute. Total Medicaid spending increased from $445 billion in 2013 to an estimated $783 billion in 2022, according to Blase.

“There are 15 to 20 million people enrolled in Medicaid who are not eligible for the program, and the true amount of improper payments exceeds $100 billion annually,” Blase told Health Care News. “By ensuring that Medicaid is preserved for those who are truly eligible, states will preserve resources for those who need them, save taxpayers a tremendous amount of money, and increase the number of people with private coverage.”

“[T]he Centers for Medicare and Medicaid Services (CMS) does not know how hundreds of billions in Medicaid money is being spent by insurers nor how much value recipients and taxpayers are getting for the massive amount of spending through Medicaid,” wrote Blase in a Paragon study titled “Managed Care in Medicaid: Need for Oversight, Accountability, and Reform,” published in October. “CMS has prioritized maximizing enrollment over ensuring that federal dollars are being effectively allocated and has not even responded to congressional oversight letters from [last] spring on the high improper payment rates.”

Lack of Accountability

Medicaid’s growing problems are rooted in the program’s structure, which has failed to adapt to the demands placed on it, Blase says.

“States lack incentive to ensure value from Medicaid,” wrote Blase. “The federal government typically pays about 65 percent of Medicaid’s costs, with no cap on federal expenditures. Because of COVID-related Medicaid policies, the federal government now reimburses about 70 percent of program expenditures. Meanwhile, CMS has never prioritized program integrity.”

In June 2022, says Blase, 82.3 million people were enrolled in Medicaid, up from 55.0 million in 2013 before the ACA expansion of the program, and enrollment has continued to grow. About half of that growth was due to the expansion of Medicaid to able-bodied, working-age adults, with the other half the result of increased federal spending during COVID, according to Blase.

Skyrocketing costs have gone hand in hand with the surge in enrollees who are not eligible for the program, according to Blase.

“The Urban Institute estimated that 15.8 million ineligible people were on Medicaid as of September 30, 2022—a number that will increase as long as the public health emergency is extended,” wrote Blase.

No Eligibility Audits

States and CMS have not carefully monitored, much less enforced, eligibility status, opening the floodgates to more enrollees, says Blase.

“[S]tates still have large incentives to misclassify recipients as eligible under the expansion,” wrote Blase. “The lack of incentives for states to implement program integrity measures benefits the health care industry, including insurers, who persistently lobby for greater subsidies from the government,”

More than 50 million Medicaid recipients are in Managed Care Organizations (MCOs) run by private insurers under contracts with the various states. Thus, private insurers have benefited from Medicaid expansion.

The Families First Coronavirus Response Act of March 2020 increased the federal reimbursement of state Medicaid spending by 6.2 percent for the remainder of the official public health emergency, as long as states did not remove ineligible recipients or alter eligibility rules. Thus, since early 2020, states have not removed ineligible people from Medicaid.

Improper Medicaid Spending

A November 2021 CMS report estimated total federal improper Medicaid spending at nearly $100 billion, says Blase.

“This estimate is actually too low since CMS halted the eligibility component of audits for one-third of states because of COVID,” wrote Blase.

The ballooning number of ineligible Medicaid recipients is due to federal policy, says Doug Badger, a senior research fellow at the Heritage Foundation’s Center for Health and Welfare Policy.

“Since the spring of 2020, the federal government has financially penalized states that removed ineligible recipients from Medicaid,” said Badger. “This misguided policy incentivizes states to improperly keep millions of people on the government dole and cost taxpayers billions.”

There is some relief in sight, says Badger.

“Beginning in April, states can review whether recipients remain eligible for benefits,” said Blase. “While this won’t eliminate the waste and fraud the Paragon report identifies, it will at least allow states to undo some of the damage that the unfortunate pandemic policies of the Trump and Biden administrations produced.”