Eligibility Rule Letter to Senator Johnson

January 19, 2021

 The Honorable Ron Johnson

United States Senate

Washington, DC 20510

Dear Senator Johnson:

Thank you for your interest in the urgent and important work necessary to protect beneficiaries, safeguard taxpayer dollars, and ensure the sustainability of the Medicaid program by reducing waste, fraud, and abuse. While the primary responsibility for ensuring proper payments in Medicaid lies with states, the Centers for Medicare & Medicaid Services (CMS) plays a significant role in supporting states’ efforts and holding them accountable through appropriate oversight and increased transparency.

Over the past four years, the Trump Administration has proposed numerous changes to the Medicaid program such as improving overpayment collection when states pay for ineligible beneficiaries, streamlining provider terminations to remove bad actors, and consolidating provider enrollments in Medicaid and the Children's Health Insurance Program (CHIP) to improve efficiency. We have cleared a backlog of pending disallowance actions, initiating over

$1.2 billion in state recoveries related to improper claims since January 2017. In 2018, we launched the first ever comprehensive Medicaid & CHIP Program Integrity strategy. In order to shed light and provide transparency to the scope of Medicaid and CHIP, we introduced the Medicaid & CHIP Scorecard. Moreover we have moved to aggressively enforce standards around managed care financing, medical loss ratio recoveries, and other improper spending. In total, we have recovered over $10 billion in federal funding.

High rates of error among state eligibility determinations is a critical issue. The Trump Administration restarted reviews of eligibility determinations as part of the annual Payment Error Rate Measurement (PERM) process in 2017, after they were paused for several years because statutory changes required the development of a new methodology and new rulemaking. Upon resumption of reviews following the rulemaking in FY 2019, the results of the first cohort of states that again included the eligibility determinations component review drove a significant increase in the Medicaid error rate to 14.9 percent, representing an astounding $57.4 billion in improper payments and an estimated 15.83 percent error rate in CHIP, representing $2.74 billion in improper payments. The inclusion of a second cohort of states drove this rate even higher in 2020, where the Medicaid improper payment rate was estimated to be 21.36 percent, representing $86.49 billion in improper payments, and the CHIP improper payment rate was estimated at 27 percent, representing $4.78 billion in improper payments.  CMS will complete the review of the remaining 17 states and the District of Columbia under the new eligibility requirements over the next year and establish a complete baseline in FY 2021 once all states are measured under the new requirements.

Based on the measurement of the first two PERM cycles, the major drivers of the increased Medicaid and CHIP eligibility improper payments are insufficient documentation to affirmatively verify eligibility determinations or non-compliance with eligibility redetermination requirements. The majority of the insufficient documentation errors represent situations where:

  • The required verification of eligibility data, such as income, was not done at all; or
  • There is indication the eligibility verification was initiated but there was no documentation to validate the verification process was completed.

The CHIP improper payment rate also was driven by claims where the beneficiary incorrectly was determined to be eligible for CHIP, but, upon review was determined eligible for Medicaid, mostly related to beneficiary income calculations, household composition, and third party liability coverage. Some states also experienced findings related to continued non-compliance with provider enrollment, screening, and National Provider Identifier requirements.

These findings underscored issues previously brought to light by the Office of Inspector General and state-level audits that prompted CMS to conduct eligibility audits in states these entities had identified as high risk. These audits also raised questions about the accuracy of state eligibility determinations at initial application and renewal, and about retaining individuals who no longer qualify for the programs due to a change in their circumstances. Altogether, these issues prompted CMS to begin work last year to update its Medicaid and CHIP eligibility regulations as part of an effort to improve the accuracy and consistency of eligibility determinations across states.

This effort was intended to build on previous guidance issued by CMS reminding states of existing federal regulatory requirements, so that together with the federal government, states can improve the quality and timeliness of their eligibility determinations. The effort intended to set consistent data matching and eligibility verification standards and timeframes, such as standardizing for states what documents must be used for income verification at initial enrollment, and defining for states maximum timeframes for certain eligibility determinations and redeterminations; as well as ensuring strong recordkeeping and reporting in case of an audit.

I believe it is important to require all states to conduct electronic data matches against income sources at least every six months to identify potential changes in circumstance that could affect a household’s eligibility or level of benefits. Also important would be conducting periodic checks of federal data sources that help to identify when a beneficiary potentially has moved out of state. While most states do this currently, not all are monitoring the most current sources of state wage or residency data on a regular basis. Currently states are permitted to enroll individuals based on self-attestation of income, and to verify income “within a reasonable timeframe” after enrollment. States should be required to verify income to ensure eligibility before enrolling individuals into Medicaid.

Some of the most frequently cited errors in the above stemmed from poor state documentation practices. Strengthening recordkeeping requirements by modernizing federal standards and ensuring that states maintained complete, auditable records of eligibility decisions and verifications could address this issue.

Furthermore, several state audits have illustrated cases of individuals who remained covered under Medicaid after experiencing an increase in income that rendered those beneficiaries ineligible. Studies reflect that individuals likely to be enrolled in the adult expansion group experience an increased likelihood that changes in income would make them ineligible for Medicaid. I believe that permitting states the option of conducting eligibility redeterminations more often would be helpful.

Current Medicaid and CHIP renewal regulations specify that states must promptly redetermine eligibility whenever it receives information about a change in a beneficiary’s circumstance that may affect eligibility, but the regulations do not define “promptly,” which has led to state variation in the timeliness of processing identified changes. Setting maximum timeframes for states to act upon changes of circumstance, as well as specific timeframes for states to complete annual renewals, would be helpful.

Under Hospital Presumptive Eligibility (HPE), most states set performance standards for hospitals. However, specific standards vary by state. The lack of a federal minimum performance standard has resulted in a lack of uniform implementation of HPE and concerns about insufficient state oversight of hospitals. I believe strengthening accountability for state oversight of hospitals would be critical for addressing this issue.

While the COVID-19 public health emergency refocused the agency’s priorities, and thus, indefinitely delayed our efforts to address many of these issues, I wanted to share these thoughts with you to inform your ongoing oversight of these important topics. I recognize that these will continue to be important matters that warrant continued attention beyond the end of the current administration.


Seema Verma