Kids in many states wrongly removed from Medicaid, U.S. officials say

Potentially millions of children have been improperly dropped from Medicaid rolls across many states in recent months, federal authorities said Wednesday as they sounded an alarm and called for reinstating the youngsters’ coverage through the safety-net health insurance.

The unwarranted removal of possibly large numbers of children is the most serious problem to materialize since the start this spring of a massive undertaking by every state to figure out who remains eligible for Medicaid.

This unwinding, as it is known, was triggered by the end of a pandemic-era promise that everyone in the nation’s largest public insurance program could stay in it. The undertaking is a prime concern of Biden administration health officials, who have been monitoring states closely in hopes of avoiding a surge in the nation’s uninsured as low-income people lose Medicaid coverage for paperwork reasons or because they no longer qualify.

The flaw revealed publicly Wednesday by the administration’s Medicaid director involves computer systems that are not set correctly to evaluate whether individual family members still are eligible.

The federal agency that oversees the program in a partnership with states dispatched a sharply worded letter Wednesday about the problem. The six-page letter rebuking states directs them to evaluate within two weeks whether they are in violation and, if so, to immediately stop conducting renewals until the problem is fixed. Children and others who have been incorrectly dropped must be returned to Medicaid, with retroactive coverage.

“It’s unacceptable if eligible people, especially children, are being disenrolled from Medicaid or [the Children’s Health Insurance Program],” a federal insurance program for children of working-class families, said Daniel Tsai, federal Medicaid director. During a briefing for reporters, Tsai characterized the glitch as “a very clear issue that extends across multiple states.”

Tsai repeatedly declined to specify the number of states that the Centers for Medicare and Medicaid Services (CMS) is already aware of as incorrectly removing children, or the number of youngsters who have lost insurance, though he said, “we believe this issue impacts many states.” Pressed on the lack of detail, Tsai would say only that the agency is ordering every state to “assess and look under the hood whether they have this issue of not.” Later Wednesday, CMS said that, for starters, the agency estimates more than a dozen states believe they have the eligibility system flaws.

Another administration official, speaking on the condition of anonymity because they were not authorized to discuss the problem’s scope, estimated that the number of affected children “is likely in the millions.” The official added that the problem is systemic and that CMS’s directive to states to report back is designed to gather a more complete count.

Researchers at the Georgetown Center for Children and Families, which has been closely tracking the unwinding since the first states began resuming the pre-pandemic practice of annually deciding who qualifies for Medicaid, estimated that perhaps half the states are known to be removing children improperly. Joan Alker, the center’s executive director, also said millions of children are suspected to be affected, given partial data on the total number of children disenrolled so far through the Medicaid unwinding.

According to KFF, a health-care policy organization, just 15 states are making public the number of children who have lost Medicaid for any reason — not simply because of the error CMS is ordering states to fix. In those 15 states, a KFF compilation shows, 1.1 million children have lost Medicaid out of 2.7 million beneficiaries overall who have been severed from the coverage.

The Medicaid unwinding, expected to take a year to complete in most states, follows the end of the temporary guarantee of coverage under a federal law that preserved the safety-net health insurance for three years, through March. During the interval between the start of the coronavirus pandemic and the end of the enrollment guarantee, Medicaid rolls nationwide swelled by one-third, to 85 million late last year.

Under Medicaid eligibility rules, children can qualify for the insurance even if their families have incomes higher than the earnings that would allow their parents to qualify. For that reason, children are especially vulnerable to the problem CMS has detected.

The problem detected in many states occurs in instances when Medicaid programs use an automated method, with computerized data such as wage records, to determine which beneficiaries remain eligible — a method the federal government prefers over mailing out renewal notices. The automated method accounts for about one-fourth of the renewals so far nationwide.

According to Tsai, the problem arises when a state uses a family’s entire income to determine whether parents and children qualify for Medicaid, rather than taking into account that children usually are eligible up to higher income levels.

A similar issue can arise in families in which parents and their children have different immigration statuses that can influence eligibility for the insurance.

The letter CMS sent Wednesday ordered states in violation to fix the problem right away and gave them choices about how to proceed, including giving children an automatic extra year of Medicaid. If states do not comply, CMS officials are telling them, they may be penalized, including financially.

“We also recognize that states may have significant work ahead,” Tsai said.

Kate McEvoy, executive director of the National Association of Medicaid Directors, agreed that “it’s a big lift for states.”

She said the issue of using family incomes instead of individual incomes, with the ripple effects onto children, emerged just two weeks ago as a matter of whether states are complying with federal requirements. She said that in states’ detailed preparations and consultation with federal health officials before the unwinding began, the question of how states were handling income checks in the automated renewals did not arise.

“It was not a priority that was identified previously by CMS,” McEvoy said. Months into the renewals, she said, states find it cumbersome to locate available contractors to redesign computer systems already in use. “It is another stage of an already difficult effort,” she said.

Joel D. Ferber, an attorney with Legal Services of Eastern Missouri, said, “I’m suspicious as to why so many kids have been cut off.” Missouri is one of the 15 states that are disclosing age breakdowns of the residents losing Medicaid, and half of the beneficiaries who have been cut off in the unwinding there are children, according to the KFF compilation.

“I think it’s really important” for CMS to pay careful attention, he said. “We don’t want eligible people getting cut off, especially eligible children.”

Caitlin Whaley, communications director for Missouri’s Department of Social Services, said the state’s Medicaid program does not have the problem the federal agency is prodding states to correct. In fact, she said, the state has been conferring with CMS, including about the fact that its eligibility system is not yet doing automated renewals and terminations.