Louisiana Medicaid Audit Report Misses the Mark

A recent legislative audit of the adult Medicaid expansion in Louisiana compares apples and oranges to arrive at a conclusion that millions of dollars were paid on behalf of Medicaid enrollees who did not qualify. But is it accurate to characterize these individuals as ineligible? No, not when you consider the flexibility states have in eligibility determinations.

It is critical to note that the audit did not review the accuracy of the eligibility determination based on the path through which the individual was enrolled and the relevant rules. If it did, it would have taken into consideration the different options states have for determining Medicaid eligibility in order to create an efficient and streamlined application process. These options help states effectively manage an influx of enrollees, and modernize outdated government procedures. This flexibility is particularly important to a state like Louisiana, which was still relying largely on paper-based or manual processes when Medicaid expansion was implemented. (Louisiana just this week announced that it has launched a new eligibility system.)

So if the audit didn’t test the accuracy of the eligibility determinations, what did it do? The audit first identified a targeted sample of enrollees in the adult expansion group whose average wages were over 138 percent of the federal poverty level over a period of months. It then looked at 100 randomly selected individuals in this targeted sample and determined eligibility retroactively for these enrollees based solely on Louisiana wage data. When the individual’s income fluctuated above 138 percent of the federal poverty level, the report described those individuals as ineligible. That may seem like a straightforward way to test the eligibility decision but it failed to take into consideration the relevant rules and actual data sources that were appropriately used to accurately calculate eligibility.

First, the audit failed to factor in the “reasonable compatibility standard” that states may adopt if the beneficiary’s estimate of their income and the wage data source differ. That alone could account for the audits’ findings. While these individuals may have had income above 138 percent of the FPL –  if it was within the reasonable compatibility standard – that person was still eligible based on federal rules and the options Louisiana has chosen.1 The intent of the “reasonable compatibility” standard is to eliminate the need to reconcile differences down to the penny and to smooth out fluctuations in income that are very common for low wage workers. Another virtue of the reasonable compatibility standard is that it may mitigate any disincentive to work fewer hours by reducing the threat of losing Medicaid coverage.

Secondly, the audit did not examine the actual source of wage data. Take for example, applications that originate from the federal marketplace (FFM). Louisiana opted to allow the federal marketplace to make Medicaid eligibility decisions for people who come into coverage through this pathway rather than forcing them to go through a second application process. This means that the state accepts the eligibility determination made by the FFM, based on the rules established by the state, and automatically enrolls these individuals without duplicating the federal determination. This process also reduces the burden on the state’s administrative staff.

However, FFM determinations are based largely on IRS data for taxpayers for which there is a known lag of a year or more. Differences can easily occur between last year’s tax return and quarterly wage data. These differences do not mean an eligibility error was made.  

The report states that “under Federal law (42 CFR 435.948) agencies must request information related to wages from state agencies to the extent the agency determines such information is useful to verifying the financial eligibility of Medicaid recipients and applicants.” It also indicates that “According to LDH’s verification plan, caseworkers are required to verify wages at application and upon renewal.” It goes on to note in bold letters with a red emphasis that the Louisiana Department of Health (LDH) “did not check wages for these recipients prior to determining their eligibility for Medicaid expansion” in three of four types of determinations. This suggests that LDH failed to follow proper procedures.

But that statement from the audit is not an accurate reflection. The state is not required or expected to check wages for applicants transferred from the FFM nor when enrolling SNAP enrollees through what is known as the fast-track process.  

There are legitimate reasons the audit, as conducted, came up with different results. But the report should not be taken at face value in its conclusion that these differences were eligibility errors.

The report makes specific recommendations for changes. One of those recommendations is to follow the path of 20 states in conducting interim checks on income eligibility. But I would point out that 31 states have chosen not to do this. Why? Because interim checks are not required and result in churning on and off the program for low-income individuals and families who can experience frequent but temporary changes in income. Churn, and the resulting gaps in coverage, lead to a myriad of issues including unmet health needs and higher costs when needed care is delayed, not to mention additional administrative costs associated with disenrollment and reenrollment.

I do support the report’s recommendations to boost efforts to ensure that eligibility workers are well trained and fully understand how to accurately execute their responsibilities. One of the reasons states are moving to data-driven systems is to eliminate the human error that occurs with manual processes. More training will be critical in adapting to a new electronically-driven eligibility environment, as well as in assuring accuracy when manual intervention is required. But I would urge caution in pressing forward with process changes while breaking in a new eligibility system. Based on other states’ experience, troubleshooting and refining new data driven processes takes time. It’s not advisable to introduce new business processes until those that have been built into the system are verified.

A final note: keep in mind that any changes Louisiana adopts to limit flexibility in eligibility determinations, as suggested by the audit’s recommendations, will also impact kids enrolled in Medicaid and LaCHIP. The state’s eligibility determination rules apply to all the so-called MAGI groups, which includes children. Louisiana has been a national leader, and a standout among southern states, in covering its children. Efforts to tighten the reins on eligibility and impose new verification processes, including more frequent eligibility reviews, could put the state’s success at covering children at risk.

  1. For more information on reasonable compatibility, see https://www.shvs.org/resource/reasonable-compatibility-straw-models-federal-requirements-and-state-options-for-constructing-a-states-financial-reasonable-compatibility-standard/.
Tricia Brooks
Tricia Brooks is a Senior Fellow at the Center for Children and Families