The enactment of the Affordable Care Act (ACA), combined with policies adopted during the COVID-19 pandemic, has led to a dramatic expansion of Medicaid, including the enrollment of millions of people who, by law, are not eligible for the program, concludes a new study by the Paragon Health Institute.
A scathing report issued in September by the Office of Inspector General at the Department of Health and Human Services (HHS) found that states are failing to require essential reporting by Medicaid managed care organizations (MCOs).
“Consequently, the Centers for Government-run Medicare and Medicaid Services (CMS) does not know how hundreds of billions in Medicaid money is being spent by insurers nor how much value recipients and taxpayers are getting for the massive amount of spending through Medicaid,” states the Paragon report. “CMS has prioritized maximizing enrollment over ensuring that federal dollars are being effectively allocated and has not even responded to congressional oversight letters from the spring on the high improper payment rates.”
The Paragon issue brief, “Managed Care for Medicaid: Need for Oversight, Accountability, and Reform,” was authored by Brian Blase, Ph. D., the president of Paragon Health Institute.
Medicaid’s growing problems are rooted in the program’s structure, which has failed to adapt to the demands placed on it, the study says.
“States lack incentive to ensure value from Medicaid,” the issue brief notes. “The federal government typically pays about 65 percent of Medicaid’s costs with no cap on federal expenditures. Because of COVID-related Medicaid policies, the federal government now reimburses about 70 percent of program expenditures. Meanwhile, CMS has never prioritized program integrity,” states the brief.
The cost of the program now exceeds $420 billion annually. In June 2022, Paragon points out, 82.3 million people were enrolled in Medicaid, up from 55.0 million in 2013 prior to the ACA expansion of the program. Paragon attributes about half of that growth to the expansion of Medicaid to able-bodied, working-age adults, with the other half the result of increased federal spending during COVID.
Skyrocketing costs have gone hand in hand with the surge in enrollees who are not eligible for the program. “The Urban Institute estimated that 15.8 million ineligible people were on Medicaid as of September 30, 2022 – a number that will increase as long as the public health emergency is extended,” the study says.
Originally intended to serve the needy, children from low-income households, pregnant women, and individuals with disabilities, Medicaid is now the largest welfare program in the nation. States and CMS have not carefully monitored, much less enforced, eligibility status, opening the floodgates to more enrollees.
The study found that “states still have large incentives to misclassify recipients as eligible under the expansion. The lack of incentives for states to implement program integrity measures benefits the health care industry, including insurers, who persistently lobby for greater subsidies from the government.”
While insurers have benefited from Medicaid expansion, taxpayers have been enlisted to pay for an ever-growing cost of the program, beginning with the enactment of the Families First Coronavirus Response Act of March 2020. That law increased the federal reimbursement of state Medicaid spending by 6.2 percent for the remainder of the official public health emergency, “as long as states did not take steps to remove ineligible recipients or alter ineligibility rules. Thus, since early 2020, states have not removed ineligible people from Medicaid.”
Nearly a year before the HHS inspector general identified serious problems with the program, a November 2021 CMS report estimated total federal improper Medicaid spending at nearly $100 billion – or about one-quarter of the program’s spending. “This estimate is actually too low since CMS halted the eligibility component of audits for one-third of states because of COVID,” the Paragon issue brief points out.
Doug Badger, a senior research fellow at the Heritage Foundation’s Center for Health and Welfare Policy, deplores the ballooning number of ineligible Medicaid recipients.
“Since the spring of 2020, the federal government has financially penalized states that removed ineligible recipients from Medicaid,” said Badger. “This misguided policy incentivizes states to improperly keep millions of people on the government dole and cost taxpayers billions.”
Badger notes there is some relief in sight. “Beginning in April, states can review whether recipients remain eligible for benefits. While this won’t eliminate the waste and fraud the Paragon report identifies, it will at least allow states to undo some of the damage that the unfortunate pandemic policies of the Trump and administrations produced,” said Badger.