“Deemed Newborns:” Collateral Damage in the PHE Unwinding

This blog is about the babies on the bus.  You know, the ones who go “Wah-Wah-Wah” all around the town. It seems that, in the course of the PHE unwinding, some of them are getting thrown under the bus. As my colleague Elisabeth Wright Burak recently reported, Arkansas disenrolled 3,300 newborns from Medicaid in April; over the next three months, this number had increased to a total of more than 15,500 newborns according to the state’s own monthly reports collected on the CCF 50-State Unwinding Tracker.

Terminating the Medicaid coverage of a newborn during the first year of life is bad form, particularly for a program that is the nation’s largest insurer of births.  It’s also flat-out illegal, and has been for many years.  This is what section 1902(e)(4) of the Social Security Act, initially enacted in 1984 and most recently amended in 2009, now says:

“A child born to a woman eligible for and receiving medical assistance under a State plan on the date of the child’s birth shall be deemed to have applied for medical assistance and to have been found eligible for such assistance under such plan on the date of such birth and to remain eligible for such assistance for a period of one year.”

There’s no ambiguity here.  If a child’s mother is a Medicaid beneficiary at the time the child is born, the child is automatically enrolled in Medicaid for one year from the date of birth. Full stop.

It doesn’t matter that no Medicaid application is filed; the newborn “shall be deemed to have applied.”

It doesn’t matter that the state Medicaid agency has not made an eligibility determination; the newborn “shall be deemed to have been found eligible.”

It doesn’t matter if the mother loses her Medicaid eligibility during the course of the year (although with postpartum coverage now extended to 12 months in most states, maternal eligibility churn should no longer be a common problem).

It doesn’t matter if the newborn is no longer in the mother’s household at some point during the year.

And it doesn’t matter if the PHE unwinding period overlaps with the newborn’s first year; the newborn “shall be deemed…to remain eligible…for a period of one year.”

CMS has spelled out this “deemed newborn” requirement for states in regulation and in guidance. Despite these efforts, as our colleague Kay Johnson has pointed out, state compliance with the requirement was problematic even before the PHE, as evidenced by the “missing babies” phenomenon.  Moreover, the PHE unwinding itself is an unprecedented challenge for state Medicaid agencies that has resulted in considerable chaos, as my colleagues Tricia Brooks and Allie Gardner chronicle almost every Wednesday.

Some states have a different and wrong interpretation of the regulation on deemed newborns. They ignore the fact that the regulation indicates that the child will have been deemed to have applied and that the regular renewal process must be followed in the month when the baby turns one. In some cases, the state simply sends a new application for the baby, which is not only improper but also creates an administrative barrier to continuity of coverage and access to care at a vulnerable time in a child’s life. And during the PHE when states were not allowed to disenroll deemed newborns, the number of young children in the deemed newborn category has grown and makes it doubly concerning when states like Arkansas report terminating coverage for more than 15,000 newborns.

Perhaps additional guidance on the rights of “deemed newborns” would be helpful. CMS has not yet referenced the one-year coverage requirement in the multiple PHE unwinding guidances it has issued, but it should now do so.  The guidance should, among other things, explain the procedures states should follow in conducting renewals of newborns as they turn one year old so that they are not disenrolled unless they are in fact no longer eligible for Medicaid and are not eligible for other programs, including CHIP and the Marketplace.

Context matters.  The context here is that, during the first quarter of the PHE unwinding (April through June) a state can qualify for a five percentage point increase in its federal matching rate if, among other things, it complies with “all” federal requirements applicable to eligibility redeterminations.  “All” includes section 1902(e)(4), which specifies that there be no disenrollment during the first year of eligibility for a “deemed newborn.”

Five percentage points may not sound like much, but depending on the state, it can translate into tens or hundreds of millions of federal dollars. CMS should not be releasing this bonus to states that, during April, May, or June have disenrolled deemed newborns who are less than one year old. (The same policy should apply to the 2.5 and 1.5 percentage point bonuses for the last two quarters of calendar year 2023).  At the very minimum, CMS should use its deferral authority to withhold payment of the 5 percentage point bonus to a state that has disenrolled “deemed newborns” while it seeks information from the state as to whether the state’s actions are allowable.

Plainly said, we should not be rewarding states for throwing babies under the bus.

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.