Here comes the Medicaid unwinding: The healthcare industry braces for coverage disruptions

A potentially tumultuous period for revenue cycle teams in particular and the U.S. healthcare system in general begins April 1, with the phasing out of a three-year run of Medicaid continuous enrollment.

The so-called Medicaid “unwinding” originally was connected to end of the COVID-19 public health emergency (PHE), which is scheduled for May 11. But the FY23 omnibus legislation delinked the unwinding from the PHE, meaning states have the option to begin reviewing eligibility and disenrolling ineligible beneficiaries about six weeks sooner.

In conjunction with the unwinding process, the federal government is reducing the enhanced federal matching rate (a.k.a., the federal medical assistance percentage, or FMAP) that has been in place during the PHE. The increase in the federal contribution to state Medicaid programs will drop from 6.2 percentage points to 5.0 in April-June, 2.5 in July-September and 1.5 in October-December.

Estimates of the impact on enrollment vary, but most projections put the number of affected beneficiaries well into the millions.

“We’re anticipating that a hospital’s coverage denials are probably going to increase and go through the roof,” said Melissa Harbert Miskell, MBA, head of markets and consulting with Revecore, a revenue integrity and claims solutions company.

Millions could be temporarily uninsured

On April 1, states can begin disenrolling beneficiaries who don’t meet traditional eligibility criteria — criteria that especially can be restrictive in the 11 states that have not expanded Medicaid as authorized by the Affordable Care Act (Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Wisconsin and Wyoming). States have up to 12 months to review their enrollment registries as part of the unwinding.

In August 2022, federal estimates projected that 9.5% of Medicaid and CHIP beneficiaries (or 8.2 million people based on enrollment figures at the time) will need to transition to other insurance due to a loss of coverage. An analysis funded by AHIP and conducted by NORC at the University of Chicago puts the number who will end up uninsured at 3.8 million (the analysis includes a dashboard providing a state-by-state breakdown).

Reva Sheehan, senior director for customer insights with mPulse Mobile, a healthcare AI solutions company at which the client list includes Medicaid managed care plans, hypothesized that the biggest reductions in coverage could come in the first few months of the unwinding. Because July 1 represents the largest drop in the FMAP, states have a financial incentive to trim their rolls by that date.

“I don’t have a crystal ball, but if I did, I would say we’re going to obviously see the largest amount of Medicaid disruption happen within that time,” she said.

An administrative boondoggle looms

In addition to the more than 8 million who will be deemed ineligible, the federal estimates predict that 7.9% of enrollees, or 6.2 million, will temporarily lose coverage due to administrative churning. The term refers to people who remain eligible but fall through the cracks — for example, because they have difficulty navigating the eligibility renewal process or are unreachable after a change of address.

In theory, those people can quickly regain eligibility. But that poses another problem for providers, Miskell said.

“We feel like the [Medicaid] case workers for each state and each county are going to be flooded with reenrollments,” she said. “They’re not going to be able to handle them all.”

As a result, “There’s going to be a lot more retro enrollment where, by the time [hospitals] get everything done and get their throughput out the door, they’re going to have to retro-enroll folks. I think that’s probably a bigger concern on the hospitals — even when they have case workers that are trying to help the patients get reenrolled, we expect the individual counties to be behind on processing the reenrollment. [That] will cause more retro enrollments, which is just harder for a hospital to keep track of.”

It all seems likely to cause spikes in bad debt for hospitals, she added.

While beneficiaries can be disenrolled starting April 1 if they no longer meet Medicaid eligibility criteria, states have provided different timelines for when they will start disenrolling people because of procedural or administrative issues. Those time frames span April (Arizona, Arkansas, Idaho, New Hampshire, South Dakota) through October (Oregon).

Banding together to help close gaps

The potential impact of the unwinding puts the impetus on stakeholders, including providers, to help disenrolled beneficiaries navigate the healthcare coverage landscape and either reenroll in Medicaid or find other options. Partnerships between states, Medicaid managed care organizations and providers will be key.

“It’s kind of like all hands on deck: We’re all in this together, we all need to work together as a cohesive unit to maintain continuity of care for people,” Sheehan said. “I see a lot more involvement on the provider side, too, because what they don’t want to do is have people no-show now that they don’t have coverage.”

In trying to promote a smooth transition, a basic function that providers can perform is relaying patient contact information, thereby increasing the chances that enrollees will be in the loop about their coverage status.

Given that providers are the most likely group to have direct interactions with enrollees, they can be the ones to “make sure that [patients’] contact information is up to date so that when that packet comes in the mail, it gets to the right person’s house,” Sheehan said.

She noted CMS relaxed regulations that had prevented managed care plans and state agencies from updating member contact information based on attestation from a provider.

If they haven’t already, Miskell said, hospitals should consider whether to “beef up their staff [for] whatever their process is to get these folks enrolled and help them through the process.” Because staffing is an issue for many hospitals across operations these days, outsourcing may be an option to assist with enrollment or to help track denials that can be addressed retroactively.

The most sweeping solutions would need to come from the states. According to recommendations in a report by the Commonwealth Fund, states that have not incorporated the following policies should consider doing so promptly:

• Expanding Medicaid
• Extending Medicaid postpartum coverage for women to 12 months, as authorized by the American Rescue Plan (states that have not yet implemented or announced plans to do so include Alaska, Arkansas, Idaho, Iowa, Montana, Nebraska, Nevada and South Dakota)