The United States Centers for Medicare and Medicaid Services (CMS) recently issued an interim final rule on Medicaid redetermination processes, warning that states may lose federal funding and face fines if they do not follow federal requirements for monthly reporting or eligibility requirements for Medicaid redeterminations.
Medicaid enrollments were up during the COVID-19 public health emergency, largely due to the continuous enrollment condition, which conditioned certain federal funding on maintaining all Medicaid enrollments during the public health emergency. However, in April 2023, the continuous enrollment condition ended, and states were allowed one year to redetermine the eligibility of millions of Medicaid enrollees.
To continue to receive enhanced federal funding during the one-year unwinding period, states were required to develop operational plans and work with the agency to meet certain requirements, including prioritizing renewals. Disenrollment rates vary widely from state to state and have changed dramatically over time, as delays in state reporting make it difficult to review up-to-date information.
Based on the number of individuals who lost coverage shortly after the redetermination process began, CMS encouraged states to ensure that individuals were not losing their coverage just because of administrative processes and to reenroll eligible individuals who lost their Medicaid coverage.
On July 1, 2023, CMS received authority to withhold federal Medicaid funding not to exceed 1% Federal Medical Assistance Percentage from any states that did not report unwinding data as required. Reports from CMS that month showed that most states were not in compliance with basic renewal functionalities.
States have adopted different tactics to try to mitigate the potential harm to Medicaid beneficiaries, including using updated contact information from Medicaid managed care organizations or other databases to ensure beneficiaries are receiving renewal letters and working to adopt strategies to renew Medicaid for eligible families without the need for additional paperwork.
Under the interim final rule, CMS re-iterated the unwinding data that states are required to report during the process, defined “timely” data submission, and set out a process by which the agency can gradually reduce the Medicaid matching rate for states that do not report the required unwinding data. When states do not meet the requirements, the interim final rule outlines the process CMS may use to put states on corrective action plans and impose civil monetary penalties.
States are considered noncompliant in a fiscal quarter if they fail to comply with the reporting requirements for one or more months of the quarter. If a state fails to report data according to the requirements for just one month in a quarter, it will be subject to the Federal Medical Assistance Percentage (FMAP) reduction for the entire quarter – including months during which data were reported timely. For the first quarter in which a state is non-compliant, the FMAP reduction will be 0.25 percentage points, with the amount of the reduction growing by 0.25 percentage points for each successive quarter of noncompliance, irrespective of whether the quarters are consecutive. FMAP reductions shall not exceed 1 percentage point in any single quarter.
While the rule went into effect immediately, CMS also sought comments, which were due on February 2, 2024. It’s possible that CMS will update the final rule once the comments have been reviewed.