Ensuring Continuous Eligibility for Medicaid and CHIP: Coverage and Cost Impacts for Adults

Abstract

• Issue: Disruptions in health coverage may delay care for beneficiaries and create higher administrative costs. To address these disruptions, Congress recently mandated 12-month continuous eligibility for children with Medicaid coverage starting in 2024. One state currently has continuous eligibility for adults, and two more will by 2024.
• Goal: To estimate the impact of extending universal 12-month and 24-month continuous eligibility to all adult Medicaid enrollees on health care coverage and costs.
• Methods: Simulation of changes in health coverage and government spending impact, using the Urban Institute’s Health Insurance Policy Simulation Model.
• Key Findings and Conclusions: If all states adopted 12-month continuous eligibility for adults, 451,000 more adults would be enrolled in Medicaid in an average month in 2024, a 1.3 percent increase. There would be 267,000 fewer uninsured people in an average month, and the reduction in the number of people uninsured at any time would be greater. Federal and state spending in 2024 would increase by $479 million and $158 million, respectively. Both are increases of only 0.1 percent in spending on acute care for the nonelderly. Households and employers would each save about $1 billion a year in health care spending, and total health care spending would decline by $1.8 billion in 2024. Continuous eligibility for 24 months would further expand coverage and reduce costs.

Introduction

Every year, millions of adults are enrolled in Medicaid for less than 12 months, and many reenroll within a year.¹ Although some who leave the program after less than a year do so because they have obtained other health insurance (such as coverage through a new employer), others simply become uninsured. Disruptions in health coverage can lead to people delaying needed care and to higher costs for Medicaid.²

To improve continuity of coverage, many policymakers have proposed giving Medicaid enrollees a fixed term of continuous eligibility. Under the Affordable Care Act (ACA), states cannot make most Medicaid enrollees go through the renewal process more than once every 12 months.³ However, beneficiaries are required to report changes in circumstances that could affect eligibility, and states can require individuals to provide income verification in as little as 10 days or face disenrollment. But under a policy that guaranteed a fixed term of continuous eligibility (12 months in most proposals), coverage would remain. Yet some beneficiaries could still lose coverage during the year if they move out of state, age out of a program for children, or fail to pay premiums.

States have long had the option of extending 12-month continuous eligibility to children through Medicaid or the Children’s Health Insurance Program (CHIP). Congress made this mandatory in the Consolidated Appropriations Act of 2022. However, states need to apply for a Section 1115 waiver to extend continuous eligibility to adults. New York is the only state that currently has 12-month continuous Medicaid eligibility for adults. The Centers for Medicare and Medicaid Services (CMS) recently approved continuous eligibility waivers that will cover adults in Oregon and Illinois, and other states are seeking similar waivers.

In this brief, we use the Urban Institute’s Health Insurance Policy Simulation Model to estimate the impact of all states adopting 12-month and 24-month continuous eligibility for adults in Medicaid in 2024. By this time, all states will have implemented 12-month continuous eligibility for children. We consider the impact of similar policies on children in a companion issue brief.⁴

Our estimates do not include the temporary impact of the unwinding of the COVID-19 public health emergency (PHE), which will affect health coverage for the first half of 2024.⁵

Key Findings

Impact on coverage with 12-month continuous eligibility. If all states adopted 12-month continuous Medicaid eligibility for adults, we estimate that 451,000 more adults would be enrolled in an average month of 2024, an increase of 1.3 percent (Exhibit 1 and Appendix 1). There would be 315,000 more Medicaid expansion beneficiaries (a 2.2% increase) and 136,000 more nondisabled adults enrolled (a 1.2% increase).

With this increase in Medicaid coverage, 267,000 fewer adults would be uninsured in an average month, a decrease of 1.1 percent (Exhibit 2 and Appendix 1). Many people are uninsured for only part of the year, so the reduction in the number of adults ever uninsured during the year 2024 would be higher. There would be 145,000 fewer adults with employer-sponsored insurance, 30,000 fewer adults with nongroup coverage, and 9,000 fewer adults with coverage that doesn’t comply with ACA standards.

Impact on coverage with 24-month continuous eligibility. With 24-month continuous eligibility in all states, we estimate that 823,000 more adults would be enrolled in an average month of 2024, a 2.4 percent increase. There would be 487,000 fewer adults lacking insurance in an average month, a 2.1 percent decrease (data not shown).

In Appendix 2, we show nonelderly Medicaid enrollment in each state with universal 12-month and 24-month continuous eligibility. States that have expanded Medicaid generally see much larger increases than nonexpansion states because many more adults are eligible for the program.

Impact on spending and savings with 12-month continuous eligibility. With 12-month continuous eligibility in all states, federal Medicaid and CHIP spending would increase by $889 million in 2024 (Exhibit 3 and Appendix 3). Medicaid administrative costs would be $87 million lower because the state incurs a cost each time a person is disenrolled and reenrolled. (See “Potentially Higher Savings on the Costs of New Medicaid/CHIP Enrollees.”) Fewer people would get marketplace coverage, so federal spending on marketplace premium tax credits would be lower by $134 million. The federal government would also save $189 million on uncompensated care for the uninsured, mainly through reduced Medicare Disproportionate Share Hospital (DSH) payments. In all, the federal government would spend $479 million more on acute care for the nonelderly in 2024, a 0.1 percent increase in spending on such care.

State and local governments would spend $328 million more on Medicaid and CHIP with universal 12-month continuous eligibility for adults (Exhibit 4 and Appendix 3). This is much lower than the federal increase because many of the new beneficiaries would qualify as newly eligible under the ACA’s Medicaid expansion, and the federal government would pay 90 percent of their costs.

States would realize administrative savings of $51 million. State and local governments would save $118 million on uncompensated care. In all, state and local governments would spend $158 million more in 2024, an increase of 0.1 percent in spending on acute care for the nonelderly.

Households would save $1.0 billion in 2024 as more adults stay enrolled in Medicaid (Exhibit 5 and Appendix 3). Employers would spend $1.1 billion less in premium contributions. In all, total health care spending on the nonelderly would decline by $1.8, because health care spending is generally less in Medicaid than private health coverage because of the program’s lower provider payment rates.

Impact on spending and savings with 24-month continuous eligibility. With 24-month continuous eligibility in all states, we estimate that net federal spending on health care would increase by $1.5 billion and state spending would increase by $597 million, increases of 0.3 percent. Households would save $2.5 billion in premiums and other out-of-pocket health care costs.

Discussion

Until 2022, there was little interest in extending Medicaid continuous eligibility to adults. New York was the only state with such a waiver. In 2022, CMS approved an Illinois waiver authorizing 12-month continuous eligibility for adults and an Oregon waiver extending 24-month continuous eligibility to all Medicaid enrollees, with continuous eligibility up to age 6 for young children. New Jersey has also submitted a waiver extending 12-month continuous eligibility to most nondisabled adults. Although states currently must submit a Section 1115 waiver to extend continuous eligibility to adults, Congress could pass legislation making it a state option that does not require a waiver.⁶

One reason for this increased interest in continuous eligibility for adults is the Families First Coronavirus Response Act of 2020, which barred states from disenrolling Medicaid beneficiaries during the COVID-19 public health emergency. This led to record-high Medicaid enrollment and record-low numbers of uninsured people.⁷ Medicaid enrollment continued to grow during the three years in which the PHE was in effect, highlighting that tens of millions of Americans become Medicaid-eligible at some point as their incomes fluctuate.

There are several important limitations in these estimates. First, the Medicaid and CHIP Payment and Access Commission (MACPAC) notes differences in continuity of enrollment between states, but only gives a few examples at the extremes.⁸ We do not have data to support simulating state-specific differences.

Second, we do not simulate health coverage in each individual month. The number of people uninsured at any point during 2024 will be higher than the average monthly number of people lacking health insurance because many people are uninsured for only part of the year.

Third, our estimates do not reflect permanent changes that states could make to their eligibility systems to enhance continuity of coverage after the public health emergency unwinds. These changes could increase enrollment both in the baseline and under a policy of continuous eligibility.

Other potential changes underway in some states include extending postpartum Medicaid coverage beyond 60 days⁹ and greater use of ex parte (automated) renewals. At the time of writing, specific state plans were evolving, and comprehensive public information on state plans was lacking.

Conclusion

We find that extending 12-month continuous eligibility to adults in all states would meaningfully increase Medicaid enrollment and reduce the number of people without health insurance. Federal and state health care spending on acute care for the nonelderly would increase as a result, but only by 0.1 percent. Households and employers would each save about $1 billion per year in health insurance premiums and health care spending. Total health care spending also would decline modestly because Medicaid provider reimbursement rates are lower than those paid by commercial insurance.

Some recent state waivers extend continuous eligibility to 24 months; we find that this would have a little less than twice the impact of 12-month continuous eligibility on coverage and government spending.