[co-author: Kian Azimpoor]

We’ve written recently about the process that states are undertaking to begin to wind down the Medicaid enrollment expansion that was necessitated by the enactment of the Families First Coronavirus Response Act in March of 2020. Readers of our blog may recall that, as one response to the pandemic, Congress essentially froze Medicaid eligibility standards in place using the eligibility standards that were in effect in a state on March 18, 2020; in exchange, states received a 6.2% increase in the federal matching rate as long as they did not disenroll Medicaid beneficiaries who were on the rolls at that time or who subsequently gained coverage. All 50 states, plus the District of Columbia and all five territories, took advantage of the matching rate increase and agreed to suspend disenrollment. Since March of 2020, Medicaid enrollment grew by 23.3 million people to 95 million enrollees; without a doubt, Medicaid is now the single largest health coverage program in the United States.

Earlier this year, as part of the Consolidated Appropriations Act of 2023 (CAA), Congress took steps to begin to phase down the matching rate increase and permitted states to restart their Medicaid redetermination processes. Medicaid experts estimate that, as a result of the redetermination process, somewhere between 8 and 24 million people could lose their Medicaid coverage. Of greater concern, the U.S. Department of Health & Human Services’ Assistant Secretary for Planning and Evaluation issued a report estimating that close to 7 million of the individuals disenrolled will actually still be eligible for Medicaid, but will be disenrolled for administrative reasons (for example, because they didn’t return a letter from their Medicaid agency asking them for financial data to verify their enrollment).

In part because of these statistics, and in part because Congress specified a fairly detailed process by which states must conduct the redetermination process as part of the CAA, the Centers for Medicare & Medicaid Services (CMS) last week issued an interim final regulation implementing the relevant provisions of the CAA. Comments on the regulation are due to CMS on February 2, 2024. We thought it made sense to walk through the highlights of the rule for our blog readers. After reading the rule, we think there are three points that are important to mention.

• First, it seems clear that CMS is concerned about the number of people who are being disenrolled for “administrative” reasons. Just looking at the data so far, CMS estimates that of the 1.6 million people who have been disenrolled as of July of this year, nearly three-quarters of them have been disenrolled for administrative reasons and are quite possibly still eligible for Medicaid. That concern prompts many of the provisions of the rule.
• Second, Congress has enacted, as part of the CAA, penalties for states that are inappropriately conducting the redetermination process.   
  • The first penalty imposes a 0.25% reduction in the federal matching rate for each quarter (up to a total reduction of 1% if there are four quarters of noncompliance) for states that don’t report information to CMS about the disenrollment process. For example, states must report the number of redeterminations initiated; the number of beneficiaries renewed in total (and those who are renewed automatically because the state has sufficient data for enrollment; CMS calls these “ex parte” renewals); the number of individuals disenrolled for any reason; the number of individuals disenrolled for procedural reasons; and call center volume, wait times, and abandonment rate.
  • The second penalty requires states to issue a corrective action plan (CAP) and permits CMS to require a state to suspend the termination of coverage of Medicaid beneficiaries for administrative reasons and to issue civil monetary penalties of up to $100,000 per day for states that fail to report this series of metrics related to its disenrollment process. The corrective action plan must describe the actions that the state is taking to prevent harm to beneficiaries and to ensure that it is ensuring compliance with the redetermination and reporting requirements. The corrective action plan must also contain milestones and timelines for the state to come into compliance. The CAP is due within 14 days of CMS’s determination that a state is out of compliance, and will be approved (or disapproved, if CMS still thinks it is insufficient) within 21 days.  States must then begin to implement the plan within 14 days. States may appeal the imposition of civil monetary penalties via the Departmental Appeals Board.
• Finally, of note, this rule was issued as an interim final rule rather than as a proposed rule. The law governing the federal regulatory process allows an agency to issue an interim final rule when the agency does so with good cause. Here, CMS explains that this rule meets the good cause exception because to force the agency to go through the full-blown notice and comment process would be impracticable and not in the public interest. CMS obviously believes that waiting the nearly one year that would be required to go through the normal rulemaking process would be deleterious to Medicaid beneficiaries who are at risk for having their Medicaid benefits terminated.

Already, Medicaid beneficiaries in at least one state have filed litigation challenging that state’s methodology in conducting its redetermination process. In Chianne D. et al v. Weida, 3:23cv985 (M.D. Fl.) Medicaid beneficiaries in the state of Florida have alleged that the state’s redetermination process violates both the Medicaid statute as well as the Due Process Clause of the 14th Amendment to the United States Constitution. At the moment, the parties are participating in procedural steps in anticipation of a hearing before the judge; we think that this case will be instructive as to how the federal courts will assess a state’s Medicaid redetermination process. We intend to keep our readers updated on the status of this important litigation.