Year-End Bill Invests in Kids’ Health Coverage, Makes Tradeoffs in Area of Medicaid Continuous Coverage

The year-end omnibus spending bill includes important investments in Medicaid and the Children’s Health Insurance Program (CHIP), including requiring states to provide 12 months of continuous eligibility for children in all states. While it pays for these items with an early phase-out of a provision that has kept millions of people enrolled in Medicaid without interruption during the COVID-19 pandemic, it also has measures to smooth the process of “unwinding” this provision. Even considering the tradeoffs negotiators made to strike this bipartisan deal, and the important policies left out, these advances make the package worth supporting.

Congress included two permanent policies to help states better secure coverage for children and people giving birth:

• Permanent, mandatory, 12-month continuous eligibility in Medicaid and CHIP for children up to age 19 in all states. Twenty-four states already provide 12 months of continuous eligibility for children in Medicaid and 32 have adopted it in CHIP, but over 15 million children are enrolled in Medicaid and CHIP programs that haven’t taken this important option. By preventing children from losing coverage even if their family’s circumstances change mid-year, continuous eligibility can help improve health outcomes and reduce administrative burdens by reducing churn into and out of coverage. Continuous eligibility is associated with improved rates of insurance, reductions in gaps in insurance and gaps due to administrative complexity, a lower probability of being in fair or poor health, and an increase in the average length of enrollment. A permanent, nationwide requirement for 12 months of continuous eligibility, which the remaining states must adopt by January 2024, is a critical investment that will help protect children’s coverage well into the future.
• Permanent option for 12-month postpartum coverage. The American Rescue Plan gave states the option to provide 12 months (rather than the required 60 days) of continuous postpartum coverage, but the authority is only available for five years, and 34 states (including D.C.) have taken up the option or plan to do so. Requiring all states to provide this coverage would have been a better outcome, particularly given the nation’s high and alarming rates of maternal and infant mortality. But knowing this coverage option is permanent could help encourage the holdout states to act on this policy. Extending postpartum coverage from two months to 12 ensures people get the care they need in the critical postpartum period and is a critical step for addressing stark differences in maternal mortality across lines of race and ethnicity and, in particular, the very high rates of mortality among Black women stemming largely from structural racism in our health and economic systems.

The deal pays for these provisions by phasing out the emergency Medicaid “continuous coverage” protection sooner than congressional budget estimators currently assume. The continuous coverage requirement — enacted in 2020 as a way to stabilize coverage in the pandemic — prevents states from terminating people’s Medicaid coverage until the end of the month in which the public health emergency (PHE) ends.

In recognition of the enrollment growth this would cause, the federal government gave states a 6.2 percentage point increase in their Medicaid matching rate (known as the federal Medicaid assistance percentage or FMAP), through the end of the quarter in which the PHE ends. Preliminary data show that nearly 91 million people are enrolled in Medicaid or CHIP as of August 2022, an increase of 19.3 million people or 27 percent since February 2020, before the pandemic began.

The temporary continuous coverage protection was widely anticipated to sunset at some point in 2023 and the omnibus spending bill is now setting an April 1 end date. The bill’s approach comes with tradeoffs: in addition to continuous coverage ending more quickly, not all of the associated savings will be reinvested in Medicaid. But the bill gives states time to get unwinding right, includes important resources for states as they review their Medicaid caseloads, and sets standards for how states must proceed to help minimize coverage losses:

• Setting a start date for unwinding. The bill sunsets the continuous coverage requirement as of April 1, 2023, and allows states to initiate redeterminations over a 12-month period. State Medicaid directors have pressed for certainty in order to start putting their unwinding operational plans in motion, while also asking for at least 120 days’ notice before unwinding begins, more lead time than the 60-days’ notice that HHS had promised ahead of announcing an end to the PHE. The deal gives states just over 90 days, and states can use this extra 30 days to ramp up hiring, system changes, outreach, and other planning before April 1.
• Phasing out the enhanced Medicaid matching rate. The deal phases out the higher FMAP that has been available during the PHE but ensures some increased funding lasts through 2023, providing states with longer-lasting and additional funding on net than would have been expected in the absence of this legislation, if the Administration had ended the PHE in mid-April. Caseloads are expected to decline gradually in 2023 as states work through the process of evaluating whether current beneficiaries remain eligible for Medicaid, so phasing out the 6.2 percent FMAP increase over a longer period will support states as they work through redeterminations and encourage them to take their time processing them. (States have up to 12 months to initiate the redeterminations.)
• Requiring procedural protections and transparency. The compromise also includes important protections that could help prevent people from losing coverage for procedural reasons, like returned mail or because a state falls behind in processing redeterminations. It codifies in statute the expectation set by federal Medicaid agency guidance that states have 12 months to initiate redeterminations for people enrolled during the continuous coverage period. To continue receiving the enhanced Medicaid matching rate, states would have to follow federal Medicaid eligibility requirements, update beneficiary contact information, and make good-faith efforts to contact beneficiaries when there is evidence that an enrollee has moved. In addition, all states would be required to provide monthly, public reports to help the Centers for Medicare & Medicaid Services (CMS) and stakeholders track how unwinding is going; states that don’t report would be subject to a modest matching rate penalty starting in July 2023. Such transparency is key to identifying and addressing problems during the unwinding period. Finally, the bill gives CMS additional enforcement tools, such as the authority to require corrective action plans for states with documented challenges that impact coverage retention and to then stop states from terminating people’s coverage because of procedural issues if the state doesn't take appropriate steps.

Unwinding the pandemic Medicaid continuous coverage provision is likely to be extremely challenging, and states have significant work to do to protect people from losing health coverage. But the omnibus now sets important, enforceable standards for states and ensures that CMS and stakeholders will have visibility into how it’s going. The Urban Institute recently estimated that if the PHE ended in mid-April, and redeterminations begin in May, 18 million people would lose Medicaid in the following 14 months; many will be eligible for Medicaid or CHIP but lose coverage because they weren’t able to navigate the redetermination process or because of state errors. Others will qualify for marketplace or employer-sponsored coverage but may become uninsured if they do not enroll in coverage that they may not know they are eligible for. Some may lose Medicaid and have no affordable coverage option.

Another study, from the Health and Human Services Office of the Assistant Secretary for Planning and Evaluation (ASPE), estimates that 6.8 million people — over half of them kids — could at least temporarily be disenrolled for administrative reasons, despite remaining eligible for Medicaid or CHIP.

For example, eligible enrollees could lose coverage if they don’t receive a notice to renew or don’t return the required documents in the requested timeframe, or if Medicaid agencies fall behind in processing paperwork and terminations proceed (contrary to federal rules). Administrative burdens exacerbate inequity, and even though states can take steps to reduce administrative burdens to advance health and racial equity, the impact of unwinding is likely to disproportionately fall on Black and Latino people. The standards that the bill sets could mitigate these types of coverage losses, especially if CMS actively oversees the unwinding and uses the tools Congress is giving it to work with states to ensure compliance.

Other people affected by unwinding could become uninsured if they are no longer eligible for Medicaid and fall into a coverage gap (because their state hasn’t adopted the Affordable Care Act (ACA) Medicaid expansion) — a number ASPE estimated at 383,000 people — or they are unable to successfully navigate the enrollment process for marketplace coverage. One of the most impactful steps states could take to stem coverage losses would be to adopt the Medicaid expansion if they haven’t yet. And all states should bolster their processes for helping people who are no longer eligible for Medicaid to enroll in ACA marketplace coverage. Many people losing Medicaid will be eligible for free or very low-cost coverage through the marketplaces, given the recent expansion of premium tax credits that subsidize that coverage.

No compromise is perfect. Decoupling the continuous coverage requirement from the PHE saved significant funds, only some of which were reinvested into Medicaid in the form of the higher Medicaid matching rate through 2023, the two continuous eligibility policies for children and postpartum people, important programmatic extensions in Medicaid and CHIP, provisions to help justice-involved youth, and investments in mental health care. Policymakers couldn’t agree to finance coverage expansions using different offsets that would have allowed them to preserve the continuous coverage provision for longer, nor could they agree to a broader suite of Medicaid and health coverage investments — like closing the Medicaid coverage gap or investments in home and community-based services or pre-release services for all people who are incarcerated. Congress should continue to work on these important policies even as the focus shifts to states, and to the work that needs to be done to ensure that the unwinding process doesn’t compromise the key coverage gains we’ve seen over the last couple of years.