Proposed Medicaid and CHIP Eligibility Rule Overhaul Back on the Docket at OMB

In a speech to the National Association of Medicaid Directors last November, Administrator Seema Verma announced that CMS would be overhauling regulations to tighten the standards for eligibility verification in Medicaid and CHIP. For many months, the Notice of Proposed Rulemaking (NPRM) was listed on the regulatory review dashboard at the Office of Information and Regulatory Affairs (OIRA) in the Office of Management Budget (OMB).

Earlier this year, Medicaid stakeholders met with OMB staff in anticipation of the rule’s release in the spring. Then the pandemic hit, and the eligibility rule listing was withdrawn from the docket without any explanation. But our sense of relief was short-lived because it’s back now on the unified agenda with a July 2020 date.

In announcing the need for changes, Verma cited the results of the 2017 Medicaid and CHIP Payment Error Measurement Rate (PERM) audit. As my colleague Kelly Whitener wrote, CMS conducts PERM audits for one-third of the states on a rotating basis over a three-year period. CMS suspended the eligibility portion of PERM in 2014 in order to assess whether each state’s new MAGI-based eligibility system was functioning as intended. In 2017, the eligibility review was reintegrated into PERM for the first round of 17 states and results were subsequently published in the 2019 HHS Financial Report.

The HHS financial report indicated that most of the PERM eligibility errors were due to insufficient documentation of eligibility verification in state records, shortcomings in state provider certification processes, or children being enrolled in CHIP incorrectly when they were eligible for Medicaid. In fact, the HHS financial report attributes only 3 percent of the identified errors to ineligibility.

However, there’s no doubt that Medicaid critics will pounce on the need to tighten up eligibility by citing beneficiary fraud and the need for program integrity. Notably, payment errors are NOT synonymous with fraud, and any evidence of beneficiary fraud – that is, individuals deliberately providing deceptive information to enroll in Medicaid – is anecdotal at best.

In addition to the eligibility rule, we know that CMS plans to propose rule changes to the PERM process itself in order to ‘recoup eligibility-related improper payments.’ This alone may prompt some states to err on the side of over-verifying eligibility, which we know will result in fewer eligible people enrolling and retaining coverage.

We don’t know when the rule will be posted or the full extent of the proposed changes – but ‘overhaul’ seems dramatic considering that significant changes to eligibility were implemented by the Affordable Care Act (ACA) in order to better align Medicaid and CHIP with Marketplace coverage and to modernize how eligibility is verified.

However, there is one adjustment we noted in the posting of the rule at OIRA. The priority of the rule has changed from ‘not economically significant’ to ‘economically significant.’ While we also don’t know what precipitated the change, we do know that Medicaid advocates alerted OIRA to that fact that the Administration’s budget documents, including the Budget in Brief and Analytical Perspectives, described savings from the rule ranging from $17B to $21B. That’s significant enough to require CMS to conduct a full regulatory impact analysis.

Clearly states need to improve their recording keeping when nearly 40 percent of the errors were associated with insufficient or missing documentation. But any finger pointing should include the IT vendors that are paid billions of taxpayer dollars to design eligibility systems that meet state and federal specifications, and yet have failed miserably to avoid repeating the same mistakes over and over again across states.

Technology issues have plagued state implementation of new MAGI-based eligibility systems and have wreaked havoc on state processes and beneficiary experiences. And why is it that we had to build 51 separate eligibility systems that fundamentally perform essentially the same functions in the first place? After all, businesses use standardized accounting software products that provide flexibility to customize basic accounting functions for each business’ specific policies and practices. We can do this with eligibility systems. But that’s a topic for another time.

What we must do when this rule is published for comment is ensure that proposed changes don’t result in eligible kids and families being denied access to health care because of burdensome processes. We have the tools we need with changes that the ACA implemented to simplify eligibility and use technology to retire paper-based, manual processes with efficient, data-driven, electronic eligibility.

We need to continue to perfect these systems and processes rather than change the rules of the game at a time when state Medicaid agencies and public health departments are overwhelmed with responding to the unprecedented effects of an uncontrolled pandemic and its resulting economic crisis.