The Medicaid unwinding continues to pose issues one year in, but healthcare coverage appears stable

The unwinding of Medicaid continuous-enrollment requirements reached the one-year mark this month amid mixed measures of the effect on overall coverage.

In one sense, the impact has exceeded all projections. Since states could begin disenrolling Medicaid beneficiaries on April 1, 2023, coverage for more than 19.6 million beneficiaries had been terminated as of April 4, according to the Kaiser Family Foundation’s tracker.

In 2022, HHS estimated that 9.5% of Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries (about 8.2 million people based on enrollment figures at the time) would lose coverage and need to transition to other insurance. That number was eye-catching but since has been dwarfed by the actual total.

There are still 32 million potential renewals to be determined, according to KFF. Meanwhile, 42.3 million enrollees over the last year had their coverage renewed, including 60% on an ex parte basis.

Among states with available data, 69% of terminations happened because of procedural reasons. The share ranged from 22% in Maine to 93% in Nevada and New Mexico.

“You have this process where you can’t get the engagement of the beneficiary because people aren’t opening their mail if they have an address,” George Hill, managing director with Deutsche Bank, said during an April 8 webinar hosted by the Brookings Institution on key healthcare business trends. “People aren’t answering phone calls from people they don’t know.”

Paul Ginsburg, nonresident senior fellow with Brookings, said the issue is a prime example of the administrative snags that hamper U.S. healthcare.

“Many countries have auto enrollments in their insurance plan, and there’s a lot of interest among policy wonks that are both conservative and liberal here [in the U.S.], but the administrative challenges of doing it in this country are just amazing,” Ginsburg said during the webinar.

Opening up other coverage

CMS has taken several steps to try to stem the increase in the uninsured population, most recently extending a special enrollment period (SEP) for the Affordable Care Act insurance marketplaces.

The SEP began March 31, 2023, and was scheduled to end July 31, 2024, but now it will be extended to Nov. 30.

“While most states initially anticipated completing unwinding-related renewals by mid-2024, many states are expected to extend their unwinding timelines for several additional months, due to adoption of strategies to promote continuity of coverage for eligible individuals, pauses in procedural disenrollments, or other state-specific situations,” CMS’s Center for Consumer Information and Insurance Oversight stated in a March 28 memo announcing the expanded window.

Before that, the 2024 final rule for marketplace health plans established the option to expand the period in which consumers can select a new plan after being disenrolled from Medicaid or CHIP. The previous 60-day limit can be bumped up to 90 days at the discretion of marketplace administrators.

Last month, CMS released December data showing that among the 32 states using healthcare.gov as their ACA marketplace, more than 4 million consumers at some point had been enrolled in Medicaid or CHIP.

Stability in the big picture?

Such numbers indicate why, even as stakeholder concern lingers on behalf of individuals and families at risk of falling through the coverage cracks, the news is not all bad for healthcare providers from a payer-mix standpoint.

“We haven’t seen a huge uptick in the uninsured,” Ann Hynes, managing director with Mizuho Americas, said during the Brookings Institution webinar.

According to the most recent available data, the uninsured rate was 7.7% in Q3 2023. That’s the same as in Q1, the final quarter before the unwinding began. One factor is the record 21.3 million enrollees who signed up for marketplace plans during the 2024 standard enrollment period.

Hynes also foresees the possibility of growth in commercial-plan coverage because some people with access to employer-sponsored insurance (ESI) may have found more affordable choices in Medicaid during continuous enrollment. With that option no longer available, they likely would revert to ESI coverage.

Early this year, when large for-profit health systems held their investor calls to report Q4 2023 financial results, the outlook was optimistic.

“It’s still early, but we believe there’s some modest benefit [to payer mix] that we’ve seen as patients have migrated from Medicaid [to other coverage],” said Bill Rutherford, CFO of HCA Healthcare. “I don’t believe that’s material yet. We’ll see how that continues to trend throughout 2024.”

Estimates are that roughly 30% to 35% of individuals obtain other coverage, Rutherford added, and a “decently large number” reenroll in Medicaid after being disenrolled due to administrative obstacles.

More recent data suggest reason for concern in the industry at large. KFF released survey results showing 23% of disenrolled beneficiaries remained without insurance when the survey was conducted in February and March. That would equate to about 4.5 million people based on the latest numbers.

A possible conundrum

A potential concern for Medicaid managed care organizations (MCOs) is the impact on risk-adjusted capitation rates. If plans lose predominantly younger and healthier enrollees during the unwinding, acuity mix becomes an issue to watch, Ginsburg posited.

“Typically, what we’ve seen is your younger, healthier people get redetermined out because your older, sicker people are going to pay much closer attention to their healthcare,” Hill said.

Thus far, however, there does not appear to be cause for alarm.

“[Managed care] companies will say most states have been giving some acuity adjustments, and we’re still going through that process,” Hynes said, noting the picture should be clearer when 2025 capitation rates are set later this year.

Medicaid enrollees tend not to engage with the healthcare system in the same manner as Medicare beneficiaries, Jailendra Singh, managing director with Truist Securities, said during the webinar.

As a result, “you just cannot come to the conclusion at this point that we have good color on how acuity is shaking out,” he said. “This process could easily take six to nine months before we have good clarity [on] how actual Medicaid acuity looks.”

Adjustments could continue through the first half of 2025, Hill noted.

“If you ask any Medicaid managed payer, it’s probably going better than expected,” Hynes said.

A key group to follow

Among the groups of consumers that bear watching as the unwinding continues to play out are those who are dually eligible for Medicare and Medicaid.

The continuous-enrollment period was a big help to many in the dual-eligible category, according to new data. A study published April 11 in JAMA Network Open reported that Medicaid coverage loss lasting at least one month among that segment ticked up from 6.6% in 2015 to 7.3% in 2019, then plummeted to 2.3% in 2020 as continuous-enrollment requirements began. The researchers also found that disparities in disenrollment rates between white and Black beneficiaries essentially were eliminated that year.

Especially among dual-eligible beneficiaries who were eligible for the Medicare Part D low-income subsidy, Medicaid loss over this past year “more likely reflected administrative barriers (e.g., difficulty completing a redetermination) rather than a change in eligibility,” the researchers noted.

“Our study underscores the potential for vulnerable groups, including people of color and those with disabilities, to experience disruptions in Medicaid coverage,” they wrote. States should enact policies such as expanding the use of ex parte redeterminations, they added.