GAO Reveals Medicaid Eligibility Inaccuracies, Recoup Strategies

The Government Accountability Office (GAO) has conducted the first review of state Medicaid eligibility determinations since the ACA’s implementation in 2014 and found that there were several accuracy issues.

“In assessing eligibility for Medicaid, states must determine whether applicants meet eligibility criteria, such as financial and citizenship requirements. The accuracy of eligibility decisions has implications for federal and state spending,” GAO explained. 

“The Patient Protection and Affordable Care Act made significant changes to Medicaid eligibility rules beginning in 2014, including new ways of calculating income and new requirements related to electronically verifying applicants' information. Yet, little is known about the accuracy of states' Medicaid eligibility determinations since these changes were implemented.”

GAO conducted 47 audits on 21 states’ eligibility determinations. The performance audit ran from July 2018 to January 2020 and covered eligibility determinations published from 2014 through 2018.

Almost 62 percent of the states reviewed—13 out of 21 states—had incorrect or incomplete income or asset information. 

Over 40 percent of the 47 audits revealed that eligibility redeterminations were not timely. Nine of the 21 states—or approximately 43 percent—did not disenroll ineligible individuals in a timely fashion.

Between 20 and 33 percent of states showed unsatisfactory performance on unresolved income discrepancies, enrollment on the incorrect eligibility basis, and changes in situation that were not noticed or confronted.

However, GAO emphasized that a state could demonstrate unsatisfactory performance in any of the categories of eligibility determination accuracy indicators without the inaccuracy resulting in false eligibility. 

An individual could fall under two categories for eligibility—such as being pregnant and disabled—but a state would choose to enroll them based on only one factor. Thus, if an individual’s income was incorrectly assessed as making them eligible for Medicaid, they may still be correctly enrolled based on their health condition.

To provide a fuller picture of the variation between states’ customized eligibility procedures, GAO also interviewed five states, CMS officials, and analyzed different states’ eligibility laws in order.

While states may have similar conditions for eligibility, individuals may be categorized differently in different states. State officials said they made categorization decisions based on an individual’s eligibility for other federal programs like social security income, which applicable categories gave the individual access to the most benefits, and which applicable categories had the least financial impact on the individual.

The claim that CMS cannot recoup eligibility-related improper payments adds further controversy to an already fraught situation. Under any other condition, if a state accrues improper payments, CMS would be able to recoup the costs. However, the agency has argued that it cannot recoup eligibility-related costs since eligibility has been put under states’ jurisdiction.

“CMS officials told us they do not have the authority to recoup federal funds related to eligibility errors identified outside of the PERM process, such as through state single audits,” GAO explained.

However, CMS and the Administration have demonstrated that they are taking initiative to institute more oversight for eligibility procedures.

“According to CMS officials, this is because of the specific statutory instruction limiting recoupments to instances when eligibility-related errors exceed the three percent error rate threshold, and because PERM is the process that CMS uses to calculate that error rate,” the report stated. “The President’s fiscal year 2020 budget request included a legislative proposal to expand HHS’s authority to issue disallowances for eligibility errors.”

Since the ACA’s implementation, CMS oversight regarding state eligibility procedures has been somewhat removed, to allow states to develop their procedures in light of ACA requirements. Instead of applying strict eligibility requirements nationwide, states are supposed to customize their own Medicaid eligibility plans.

In 2019, CMS reinstated the Payment Error Rate Measurement (PERM) eligibility reviews, which allows CMS to recoup costs on eligibility-related improper payments when states exhibit an error rate of more than three percent. Seventeen states conducted the report for 2019 and over the next two years the rest of the states will take on this requirement.

By 2022, CMS expects to have the ability to recoup costs for the 17 states that started the PERM reports last year.

The agency also released guidance for Medicaid eligibility determinations in 2019 in an effort to curb poor eligibility procedures. The guidelines provided a checklist for expanded Medicaid plans to pursue.

Eligibility also lies at the heart of the conflict over Medicaid expansion. Experts disputed whether Medicaid expansion was the cause of improper eligibility classification or whether it was simply the environment in which these improper classifications took place.

GAO’s findings provide a much needed picture of the current status of Medicaid eligibility programs nationwide, which may inform CMS and policymakers with their future decisions.