– A recent study by George Mason University’s Mercatus Center found that there is a strong population of Medicaid enrollees who receive Medicaid support even though they are above the income threshold for eligibility.
“We generally find robust evidence that many Medicaid enrollees have income that exceeds eligibility thresholds,” the researchers write. “Unsurprisingly, the high degree of improper enrollment is overwhelmingly concentrated in states that adopted the Medicaid expansion, although there is significant variation across states—evidence that different states have enforced income-related eligibility rules to much different degrees.”
The authors estimate that the improper payment rate is $75 billion—or more than 20 percent of federal spending.
The Mercatus Center researchers argue that the surprising influx of enrollees in expansion states is not simply due to high need for the program but also because of eligibility misclassification.
Higher federal reimbursement rates did nothing to incentivize greater fiscal responsibility among state Medicaid programs, the researchers say. Instead, the higher rates encourage states to:
- Aim for higher enrollment
- Classify Medicaid enrollees as the Affordable Care Act’s (ACA’s) expansion enrollees
- Concentrate on increasing fees for healthcare services that expansion enrollees typically use
- Raise Medicaid managed care organization payers’ capitated payments
As a result, enrollment skyrocketed.
A separate report found that Medicaid eligibility increased 41 to 46 percent after the ACA passed and that, as a result, Medicaid coverage also expanded. The researchers were studying the effect of expansion on mortality rate and focused on households that were most likely to be impacted by the expansion, including enrollees who were at or above the 138 federal poverty level (FPL) limit.
The George Mason University authors revisit the Foundation for Government Accountability’s report from December 2016 in which expansion states’ actual enrollment was over double the projected enrollment. California had quadruple the expected enrollment only five months into 2016.
While the Congressional Budget Office (CBO) downplayed the speed of the enrollment increase, the authors claim, CBO had to boost its projected numbers over the years as actual enrollment continually surpassed the department’s expectations.
Enrollment could rise for numerous reasons. However, the Mercatus Center researchers say that it is due to a population of individuals being improperly classified as Medicaid-eligible, despite their ineligible incomes.
To discern the extent of improper enrollment, the authors look to an August 2019 study by University of Kentucky economist Charles Courtemanche and his collaborators.
Using data from the American Community Survey (ACS) from 2012 to 2017, Courtemanche and his colleagues compared the improper enrollment in nine expansion states with improper enrollment in twelve non-expansion states to estimate improper enrollment.
The expansion states increased their enrollment of adults over the 138 FPL Medicaid eligibility threshold by three percentage points over the course of the five years studied. The percent rose over time, more than doubling in 2017, when it rose 3.7 percentage points, compared to 2014, when it rose 1.5 percentage points.
If this trend were extended to all expansion states—with three percent of all individuals with incomes over 138 FPL being enrolled into Medicaid—then over half a million people would be improperly enrolled in Medicaid.
There are some categories of individuals who may be eligible for Medicaid while over the FPL and at lower levels, households may experience a higher level of income fluctuation month to month and year to year which may temporarily affect their enrollment status.
However, Courtemanche and his coauthors conducted the same evaluation on those enrolled in Medicaid who are over 250 percent of the FPL—a group which has less likelihood of income variation making them temporarily ineligible for Medicaid—and found that there remained a significant difference between expansion states’ growth versus non-expansion states’ growth in enrollment.
CMS analysis supports the paper’s conclusion, the authors say, pointing to the agency’s recent report on improper payments. The authors quote CMS’s conclusion which states that high levels of improper payments were largely attributable to misclassification of eligibility.
An associate professor from Georgetown University noted, however, that the improper payment calculations cannot be taken at face value and compared to the previous years’ numbers.
The introduction of an eligibility element to the Payment Error Rate Measurement (PERM) program makes this year’s estimates incomparable to last year’s. This is in part due to the fact that the numbers only apply to 17 states, as the new program is being rolled out to states over a three-year time span.
For the most part, errors were due to lack of documentation, specifically on the provider end such as in cases where the state failed to comply with provider screenings, enrollment, and National Provider Identifier (NPI) guidelines. Only ten percent of improper payments due to ineligibility involved failed reimbursement due to a provider not being enrolled or a beneficiary being ineligible, Georgetown University author noted.
“Errors estimated by PERM reflect whether states, managed care plans, and providers are in compliance with program rules (including maintaining documentation of compliance),” Georgetown University researchers argued.
“They do not suggest that ineligible individuals are inappropriately enrolling in Medicaid and CHIP and are defrauding the government. Medicaid and CHIP provide health coverage – primarily to children – and not money. Medicaid and CHIP dollars flow to managed care plans and providers. (In fact, PERM does not count as an error when an eligible individual is inappropriately denied Medicaid.) So while the federal government has responsibility to ensure that federal funds are used appropriately, any references to overpayments should be directed at states, managed care plans, and providers.”
While the George Mason University researchers and those from Georgetown University are at odds over the core issue, both agree that one critical step forward is to ensure that any inaccurate calculations of enrollment and payment are identified and do not recur.
The George Mason University authors add that Congress should establish a fixed reimbursement rate that is the same between expanded and non-expanded Medicaid programs to make sure that states prioritize cost-effectiveness.
Furthermore, CMS should make up for past improper payments and conduct eligibility redeterminations in areas particularly prone to improper eligibility classifications.