Potential Effects of the Proposed Medicaid Eligibility Rule for Newly Enrolled Medicare-Medicaid Enrollees

On August 31, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule designed to make it easier for people to obtain and maintain coverage in Medicaid. Among the many changes in that rule are several major changes to the eligibility process for people with Medicare who are also eligible for help from Medicaid. CMS proposes to better integrate Medicaid applications with eligibility and enrollment data based on Medicare Part D Low-Income Subsidies (LIS) for prescription drugs. The proposed rule would also automatically enroll some people in Medicare Savings Programs where Medicaid pays their Medicare premiums and, in many cases, cost sharing, for people with limited financial resources.

In this issue brief, we estimate rates of Medicaid coverage loss among people who became Medicare-Medicaid enrollees (MMEs) during 2018 but did not have any months of MME coverage in the prior year. We compare outcomes for partial-benefit MMEs and full-benefit MMEs. For partial-benefit enrollees, Medicaid pays Medicare premiums and, in many cases, also pays Medicare’s deductibles and cost sharing on behalf of MMEs. Full-benefit MMEs also receive the full range of Medicaid benefits that are not covered by Medicare, such as long-term services and supports and non-emergency medical transportation. Among full-benefit MMEs, we defined loss of coverage as losing full Medicaid benefits. In 2018, there were 12.0 million MMEs in the 50 states and D.C., including 10.0 million in the 39 states included in this analysis. Of those 10 million, we included 1.1 million newly-enrolled MMEs (848,000 full-benefit and 294,000 partial-benefit) in the analysis. See methods for further details on the study population and outcomes of interest.

Our analysis finds that 38% of newly-enrolled full-benefit MMEs in 2018 lost coverage within their first year of enrollment and 31% lost coverage for more than 3 months, which is consistent with, but somewhat higher than, what an older study had found. Among newly-enrolled partial benefit MMEs, 33% lost coverage for one or more months and 24% lost coverage for more than 3 months. Such substantive rates of Medicaid coverage loss among Medicare beneficiaries are notable because many Medicare beneficiaries live on fixed incomes and are unlikely to experience  increases in income or assets that would trigger losing eligibility for Medicaid. Instead, the loss of Medicaid likely reflects administrative burdens associated with verifying applicants’ eligibility and renewing their enrollment. The proposed rule aims to reduce Medicaid coverage loss by reducing those burdens.

How Does the Proposed Rule Simplify Eligibility and Enrollment Processes for Medicare-Medicaid Enrollees?

The Medicaid proposed rule addresses several factors that contribute to high rates of Medicaid coverage loss among Medicare enrollees. The proposed rule would simplify the eligibility process for MMEs. Those changes are intended to increase enrollment among Medicare beneficiaries who have never enrolled in Medicaid and to reduce the number of Medicaid enrollees who lose coverage only a few months after enrolling on account of administrative barriers. Specifically, the rule would:

• Encourage states to use the LIS definitions of financial resources so that the financial resource documentation Medicare beneficiaries complete for LIS would also document eligibility for Medicaid,
• Require states with definitions of financial resources that differ from LIS to accept applicants’ self-reported value of resources unless the state already has information that is inconsistent with that value, and
• Require states to assist applicants with procuring appropriate documentation validating income and assets when it is required.

The rule also aims to reduce loss of Medicaid at the time of renewal. Those changes are intended to reduce the number of Medicaid enrollees who are still eligible but lose coverage during the renewal process on account of administrative barriers. Specifically, the rule would:

• Require states to renew Medicaid only once per year,
• Eliminate states’ option to require an in-person interview as part of the application process,
• Apply other simplified enrollment and renewal requirements that already exist for children and other adults in Medicaid, and
• Institute requirements for how states must respond when mail to an applicant or enrollee is returned.

CMS estimates that the changes affecting MMEs would result in an additional 1.5 million person-years of Medicaid enrollment, nearly $7 billion in additional Medicaid spending, and nearly $3 billion in additional Medicare spending in the year 2027. Medicaid spending would increase because Medicaid would be paying for additional months of Medicare premiums and in some cases, Medicare cost sharing and Medicaid benefits. Medicare spending is expected to increase because Medicaid coverage of cost sharing would lead MMEs to use more Medicare-covered services. Because the enrollment process would be simpler and there would be fewer renewals, the proposed rule would decrease Medicaid administrative spending. (CMS estimates that administrative spending would decrease by over $1 billion in 2027, but that includes administrative savings from provisions that would affect all Medicaid and CHIP enrollees in addition to the provisions affecting MMEs.)

What Do the Data Show?

In describing the proposed changes, CMS cited a study that showed nearly 30% of Medicare-Medicaid enrollees (MMEs) lost Medicaid for a least one month and over 20% lost coverage for more than 3 months in the year after their initial enrollment month. That study used Medicaid claims data from 2006 – 2010 and limited the analysis to full-benefit MMEs.

KFF finds that 38% of newly-enrolled full-benefit MMEs in 2018 lost at least one month of coverage within the year after their first month of enrollment (Figure 1). The analysis also finds that 31% lost over three months of coverage. New partial-benefit MMEs in 2018 had slightly lower loss of coverage than full-benefit MMEs, with 33% losing at least one month of coverage within the year after their first month of enrollment and 24% losing over 3 months. Among those MMEs who lost coverage within the first year post enrollment, the vast majority lost coverage for more than 3 months. People who lose Medicaid coverage for more than 3 months include some Medicare beneficiaries who lost Medicaid at the time of renewal in states that do more than one renewal period per year. There are also people losing Medicaid before the renewal period which may suggest that individuals were disenrolled due to post-enrollment eligibility verification. Post-enrollment eligibility verification may require submission of detailed financial records that enrollees have trouble locating and would be prohibited in most cases under the proposed rule.

Coverage loss in the 12 months after initial enrollment was more common among newly-enrolled full-benefit MMEs under the age of 65 than among newly-enrolled full-benefit MME ages 65 and older: 46% lost coverage for one or more months in the year following their initial enrollment (Figure 2). In contrast, coverage loss was lower among full-benefit MMEs 65 and older: 32% lost coverage for one or more months. Coverage loss was lower among all partial-benefit MMEs of all ages – 36% of those under 65 and 32% of those ages 65 and older lost coverage for at least one month.

Among the 38% of newly enrolled full-benefit MMEs who lost Medicaid, 79% lost all Medicaid coverage for at least one month during their 12-month follow-up period, including coverage of Medicare premiums and cost-sharing, and other Medicaid benefits (Figure 3). Those Medicare beneficiaries would have had to start paying Medicare premiums and if applicable, cost-sharing. The remaining 21% lost eligibility for full Medicaid but retained Medicaid coverage of Medicare premiums and cost sharing (if applicable). All MMEs who lose coverage no longer have coverage of Medicaid benefits, which include long-term supports and services and nonemergency medical transportation among other services and may be particularly important for people who are elderly or with disabilities. In some states, Medicaid benefits include dental, vision, and hearing – services which are important to Medicare beneficiaries but not covered by Medicare.

Looking Ahead

Our analysis shows that roughly one-third of MMEs lose Medicaid in the year following their first month of enrollment, which is unexpected given most MMEs are living on fixed incomes and unlikely to experience changes in eligibility. These findings highlight the challenges people face when trying to access Medicaid and how the new proposed rule could help people more easily navigate the application and eligibility renewal processes. They also build on the findings of older research that CMS cited as a basis for the proposed changes. This analysis does not explore how many people losing coverage re-enroll in Medicaid, whether rates of Medicaid coverage loss differ for MMEs who are not new to the program, and how the proposed rule would impact Medicare beneficiaries who are eligible for Medicaid but not enrolled. Understanding those issues will be helpful to better understand the potential effects of the proposed rule. Finally, it is unclear if changes in the proposed rule will intersect with the unwinding of the Public Health Emergency (PHE) because the timing of both are uncertain. When the PHE ends, states will need to conduct redeterminations and renewals for all enrollees for the first time in over two years, which may result in significant disenrollment and churn.

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