Half a million children, others being reinstated after removal from Medicaid

Nearly half a million children and other individuals in 30 states have been improperly dropped from Medicaid rolls, prompting federal health officials to shut down parts of a massive campaign to figure out who qualifies for the safety-net health insurance in more than half the country.

Leaders of the Centers for Medicare and Medicaid Services (CMS) on Thursday revealed the scope of the trouble, caused by computer systems failing to determine whether individual family members qualify for Medicaid. CMS discovered the problem late last month and ordered every state to report whether it was doing things wrong.

The officials said Thursday that states are in the process of reinstating everyone who should not have been cut off from Medicaid. Daniel Tsai, the federal Medicaid director, said at least some states will be in position to resume all of their Medicaid unwinding, as the undertaking is known, by the end of this month. But he did not identify how many — or which — states are able to make rapid corrections, acknowledging that some will need months.

The unwarranted removal of large numbers of children is the most serious problem to materialize with the unwinding since the government in the spring allowed states to resume assessing who is eligible for Medicaid. For three years before then, annual renewals stopped as part of the government’s response to the coronavirus pandemic. As a result, enrollment in the nation’s largest public health insurance swelled because no one left the program.

Thursday’s disclosure follows an announcement by CMS in August that the agency had discovered some states were improperly dropping children and certain other groups from Medicaid. Federal officials called the flaw a “systems glitch” and said it involved renewals that were evaluated by computer, using wage records and other electronic data, rather than directly asking beneficiaries to fill out applications. Such computerized evaluations are supposed to look at each member of a household individually, but the 30 states were assessing households as a whole.

That wrong method had the effect of improperly removing some children because, in virtually every state, children may stay on Medicaid even if their parents do not qualify. The flaw also snagged some households with members of mixed immigration statuses, as well as potentially affecting families in which one adult has a disability that keeps them eligible.

In a briefing for reporters, Tsai and CMS Administrator Chiquita Brooks-LaSure declined to answer repeated questions about how many children were among the 500,000 improperly removed from Medicaid. Tsai said that the figures from states were preliminary and that CMS did not have a breakdown, though he said the agency anticipates “a significant number.”

Joan Alker, the director of the Georgetown University Center for Children and Families, said the “vast majority” of those who were dropped almost certainly were children because they are more likely to be eligible. She pointed out that Nevada announced last week it was reinstating 130,000 people erroneously cut off from Medicaid, many of whom were children.

Thursday’s announcement follows the Aug. 30 letter that CMS sent to every state about the problem. The six-page missive directed them to evaluate within two weeks whether they were in violation and, if so, to immediately stop removing anyone from Medicaid for paperwork reasons — known as procedural terminations — until the problem was fixed.

In a news briefing after CMS’s announcement, a group of state Medicaid directors pointed out that CMS officials did not raise the distinction between individual assessments and household reviews as an issue in the months of preparation leading up to the unwinding.

“The fact we have 30 states [in violation] is a good indication this particular piece of guidance is relatively new,” said Kevin Bagley, Nebraska’s Medicaid director.

“If you would have asked me before we got this letter whether we were in complete compliance, I would have said yes,” said Cindy Beane, commissioner of the West Virginia Department of Health and Human Resources’s medical services bureau and president of the National Association of Medicaid Directors board. If CMS had told states about the distinction in January, shortly after Congress adopted the law that allowed renewals to resume, “we never would have rolled off any of these children,” Beane said.

According to preliminary data released Thursday by CMS, Pennsylvania and Nevada had removed the largest number of people — more than 100,000 each.

The data also shows that D.C., Maryland and Virginia reported they were using the wrong computer methods, and that the beneficiaries they had incorrectly removed were all children. The District and Maryland dropped fewer than 10,000 children, the figures show, while Virginia removed between 10,000 and 50,000.

The preliminary data gives estimated ranges of people affected in each state, and it says five states were still assessing the numbers of those improperly cut off from coverage.

New York’s Medicaid director, Amir Bassiri, said during the briefing that the state’s program estimates 70,000 people — about 5% of the state residents removed from Medicaid in June, July and August — were dropped inappropriately because of the computer flaw. About 41,000 of them were age 18 or younger, he said.

Bassiri said a temporary computer workaround is enabling those improperly removed to be reinstated starting this week, and the state will send follow-up notices offering to reimburse them for any medical expenses they incurred while their insurance had stopped.

Among 16 states that publicly provided age breakdowns of those dropped from Medicaid through the unwinding because they were ineligible or for paperwork reasons, nearly 1.4 million children lost coverage, according to tracking by KFF, a health policy organization. CMS officials did not say whether some of the children who were removed because of the computer flaws might be found ineligible anyhow.