Update on Eligibility Screening for Medicaid

September 19, 2013 - 5:08pm

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An effort to clear Illinois’ Medicaid program of ineligible enrollees has led to the removal of 128,700 participants, but State savings are expected to be far lower than hoped by lawmakers, according to testimony at a legislative hearing on September 17, 2013.

The State has moved to cancel 75,707 Medicaid cases as of September 9, officials of the State’s main Medicaid agency said at the joint hearing of the Illinois General Assembly’s House Human Services Appropriations and Senate Appropriations I Committees. Each case represents an average of 1.7 people, meaning that a total of approximately 128,700 enrollees were determined to be ineligible.

The Illinois Department of Healthcare and Family Services (HFS) provided written information on the screening effort at the hearing, which can be found here. HFS also posts status reports about the Medicaid Redetermination Project on its website.

The eligibility screening project is expected to save less than the General Assembly hoped because those removed from the Medicaid program did not use many services, according to HFS. Of the first 105,000 enrollees dropped between April and August, 42,000, or 40%, had no Medicaid claims in the prior six months. Of the remaining 63,000 with claims, the average State savings was $58 a month, or $44 million a year.

HFS officials said the initial results could not be used to estimate future savings. The pace of cancellations is expected to decline because enrollees deemed most likely to be ineligible were reviewed first. In addition, 75% of the cancelled cases involved clients who did not respond to a letter asking for additional information. Enrollees probably do not respond if they know they are not eligible or if they did not receive the letter, according to HFS. So far in calendar year 2013, more than 15% of cases that were cancelled have already applied again, found to be eligible and re-enrolled.

As discussed here, the Medicaid screening effort was designed to be the largest single cost-saving component of a Medicaid restructuring plan passed in May 2012 by the General Assembly. The plan was aimed at filling a $2.7 billion funding gap in the Medicaid program in FY2013 through $1.36 billion in program cuts, $240 million in reductions in reimbursement rates paid to healthcare providers and $1.1 billion in revenues, including a cigarette tax increase.

Of the $1.36 billion in program savings, $350 million was expected to come from removing ineligible enrollees. HFS had initially estimated savings of $120 million, but the Illinois Hospital Association argued that State officials had underestimated the number and cost of ineligible enrollees. The Hospital Association estimated savings of between $240 million and $720 million, based on the assumption that 100,000 to 300,000 enrollees could be ineligible and could represent an average of $200 a month of Medicaid spending. The final savings projection of $350 million was regarded as a victory by the Hospital Association because it averted the potential for additional cuts to reimbursement rates for hospitals.

In a progress report to the General Assembly on the Medicaid restructuring in March 2013, HFS estimated savings from the screening project at $150 million in FY2013. The testimony on September 17 suggested that actual savings in FY2013 were at most $11 million, partly because cases did not start to be cancelled until April, three months before the end of the fiscal year in June. HFS officials said savings for a 12-month period might be in line with the agency’s original estimate of $120 million.

At the hearing, HFS Director Julie Hamos said the State plans to appeal an arbitrator’s ruling in June 2013 that called for cancellation of a two-year, $77 million contract with a private vendor to assist with eligibility verification. In response to a grievance filed by Council 31 of the American Federation of County, State and Municipal Employees (AFSCME), the arbitrator ruled that the contract should be ended by December 31, 2013 because the State did not give AFSCME an opportunity to negotiate over the use of outside labor, as required by the union’s contract.

Director Hamos said that the General Assembly wanted HFS to use a private vendor because the Illinois Department of Human Services (DHS), which handles Medicaid applications, did not have the caseworkers or technology to do the job quickly. She said the State would consider settling the dispute with AFSCME by using certain services provided by the private vendor, Maximus, along with DHS workers.

Maximus currently reviews cases and submits recommendations to DHS. Under federal law, the State is required to make the final determination on Medicaid eligibility. As of September 9, Maximus had reviewed 275,867 cases and recommended that 136,143, or 49.4%, be cancelled. DHS had completed work on 190,756 of the recommendations and determined that 75,707, or 39.7%, be cancelled. The cancellations specifically represented 70% of the cases Maximus had recommended for cancellation. Medicaid enrollees have 20 days to submit documentation after they receive a cancellation letter.

HFS officials said that keeping Medicaid rolls free from ineligible enrollees is particularly important as the State moves toward mandatory HMO-style managed care. A Medicaid reform law enacted in 2011 requires that half of Medicaid recipients be enrolled in such plans by January 2015. Under traditional Medicaid, the State pays only for services actually used, but under managed care the State will pay a set monthly fee whether or not services are used.

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