Medicaid as Health Insurer: New Eligibility and Enrollment Rules and Practices for a Revamped Program
Born as an afterthought to Medicare five decades ago, Medicaid has evolved from an adjunct to state welfare programs to the nation’s largest health insurer. The occasion of Medicaid’s 50th birthday is a fitting time to consider that evolution, not to reminisce, but to help chart the path forward. Medicaid is a complex program with a complex history, and understanding its role in the U.S. health system is essential to ensuring that it is performing at optimal levels for its beneficiaries, as well as for states, taxpayers, and the myriad health care providers, health plans, and others touched by the program. In a four-part series supported by The Commonwealth Fund, Cindy Mann and Deborah Bachrach of Manatt Health Solutions examine Medicaid’s evolution and consider its role in the new coverage paradigm established by the Affordable Care Act (ACA).
Medicaid’s evolution from a small program linked to welfare to a major health insurer occurred over many years, but sweeping changes were needed for the new coverage paradigm established by the Affordable Care Act (ACA) to take hold.
Eligibility for Medicaid had long ago been “delinked” from welfare, but until the ACA, Medicaid eligibility was still constrained by the old welfare-based eligibility “categories,” such as children, parents caring for children, and pregnant women. With the goal of near-universal coverage, the ACA ended these eligibility silos, extending Medicaid to all low-income adults and making tax credits available through the new insurance marketplaces to those with incomes above Medicaid levels and below 400 percent of the federal poverty level ($47,080 for an individual). To accomplish the level of coordination with the marketplace envisioned by the ACA, the law also revamped Medicaid’s eligibility and enrollment process. These changes positioned Medicaid as the foundation of a coordinated set of health insurance programs that make affordable coverage available to nearly all Americans.
While the decision to expand Medicaid to all low-income adults now resides with the states, the changes in how people apply and how eligibility is determined is the law of the land in all states, regardless of whether a state has taken up the Medicaid expansion. To appreciate the extent of the change that has occurred, it’s helpful to compare the old and the new eligibility and enrollment processes.
Even after Medicaid eligibility had been delinked from welfare, but before the ACA, the Medicaid application process for adults looked a lot like the welfare application process. That process was designed for a different purpose and a different population, and not necessarily to encourage enrollment. For example, in 1997, 29 states required a face-to-face interview as a condition of Medicaid eligibility, a carryover from the welfare process. This required health insurance applicants to take a day off of work and spend an afternoon in the local welfare office to obtain coverage. While applying, and at least once a year and usually more often, consumers were required to demonstrate their eligibility for Medicaid by producing reams of documents proving their income, assets (or lack thereof), residence, date of birth, and other eligibility factors. These requirements resulted in depressed coverage rates and high rates of churning on and off insurance. But, practices that effectively kept eligible people out of coverage had no place in the system envisioned by the ACA, where coverage is both a key goal and the starting point for the delivery of cost-effective, quality care.
To effectuate the new coverage continuum, the ACA requires a single application and uniform income-counting rules (based on modified gross income as defined by the tax code) for all of the insurance affordability programs (Medicaid, the Children’s Health Insurance Program, and the marketplaces). There are no interview requirements for any of the programs, and to the maximum extent possible, information provided through the application is verified through the use of electronic data sources, so that consumers need not compile and submit paper documents to prove information readily available in electronic databases. The law similarly streamlined and coordinated the renewal process. So today there is one application, one eligibility determination process, and then enrollment in the appropriate program. For Medicaid, these changes are nothing short of transformative.
Effective implementation of these new rules was a massive undertaking requiring a modern IT infrastructure. When the ACA passed, most state Medicaid agencies were relying on antiquated information systems—some using computer language dating back to the 1950s—that had proven an enduring barrier to developing a consumer-friendly enrollment system. Moreover, the system was often shared with and owned by the welfare agency, which meant the Medicaid agency often had to wait for essential eligibility and enrollment modifications.
Recognizing that Medicaid’s systems had to be modernized, the Centers for Medicare and Medicaid Services provided states 90 cents on the dollar for the development of new systems. Funding was conditioned on full integration or a seamless interface with the marketplace and the ability to connect with the newly established federal data services hub, enabling states to electronically verify key elements of eligibility.
In the five years since the ACA became law, states and the federal government have been working on these systems. IT-related problems have impeded progress for some, but even with those challenges, today, in every state, the new taxed-based rules are being used to determine eligibility and people can apply using a single online application that allows them to enroll in the insurance affordability program for which they are eligible. Data-driven verification is also in place in all states, although modernization of the renewal process has lagged in some states.
The federally run marketplace and a growing number of state marketplaces also are making the application process highly efficient by using dynamic, online applications that narrow the questions asked based on previous answers and by verifying information against electronic sources all during one application sitting. Some states report that the majority of new applications or renewals can be processed through the online, data-driven system without any delay caused by paperwork requirements. To date, the connection between the federally run marketplace and state Medicaid agencies has not achieved the same level of integration as the state-based marketplaces. However, the ACA’s goal of a coordinated eligibility and enrollment process has been realized to a large extent. Enrollment data confirm that the new eligibility and enrollment systems are—again, to varying degrees—helping to drive uninsurance down to record lows.
While federal rules permit and encourage flexibility and state innovation, the critical advance has been to set a floor that ensures that all states move forward with improvements to enrollment in coordination with the marketplace. Achieving the level of simplification and coordination envisioned by the ACA cannot be taken for granted, however, and the new federal IT funding rules require ongoing testing and accountability so that systems continue to improve and don’t slide back to the condition they were pre-ACA. Taken together, the single application, the simplified, uniform rules for determining eligibility, and the modernized electronic eligibility and enrollment and renewal systems provide the backbone of a transformed Medicaid program and the foundation of the new coverage paradigm.