Since our publication on disenrollments caused by the “unwinding” of Medicaid’s continuous enrollment condition, the Centers for Medicare and Medicaid Services (CMS) issued an interim final rule on December 6, 2023 implementing the requirement under the Consolidated Appropriations Act for CMS to withhold federal Medicaid funding from states that do not report monthly unwinding data.

Specifically, CMS must impose a 0.25% reduction in the Federal Medical Assistance Percentage for each quarter of noncompliance (not to exceed 1%) unless the state receives CMS approval for good-faith efforts. CMS may also require states to implement a corrective action plan, suspend some or all procedural disenrollments, and/or impose civil monetary penalties not to exceed $100,000 per day for failure to comply with the monthly reporting obligation.

Note that CMS defines “procedural disenrollments” to mean a termination of a beneficiary’s Medicaid eligibility after providing required advance notice “for reasons that are unrelated to a State’s determination of whether the individual meets eligibility criteria to qualify for coverage, including for failure to return a renewal form or documentation needed by the State to make a determination of eligibility.” The comment period for the interim final rule will remain open until February 2, 2023. CMS also published an enforcement process flow chart.

On December 18, 2023, CMS released new data on enrollment changes indicating that 2.2 million children were disenrolled from Medicaid between March and September 2023. The Biden administration sent letters on the same day to the governors of nine states with the highest child disenrollment rates and called on the states to adopt additional strategies to prevent procedural disenrollments and recommended Medicaid expansion (in the 10 states that have not expanded Medicaid under the Affordable Care Act) to address the coverage gap.