Half a million people, including kids, mistakenly dropped from Medicaid

Half a million people, including a significant number of children, were wrongly kicked off Medicaid because of state system errors, the Centers for Medicare & Medicaid Services said Thursday.

Twenty-nine states and Washington, D.C., were erroneously reviewing eligibility for Medicaid at the family level instead of on an individual basis, the agency said. That means thousands of people, including children, were deemed ineligible for the low-income insurance program when they should have been automatically reenrolled.

CMS alerted states to the problem late last month and ordered them to immediately reinstate coverage for anyone who lost their insurance and pause disenrollments for anyone else who may be affected while they fix the underlying issue — or risk losing federal funding.

“By making sure the systems glitch is fixed in states across the country, we will help stop more families and children from becoming disenrolled simply because of red tape,” CMS Administrator Chiquita Brooks-LaSure told reporters.

The agency’s announcement comes as states are reviewing Medicaid eligibility for the first time in three years. During the pandemic, states were barred from removing anyone from Medicaid — even if they were no longer eligible — as a condition for receiving enhanced federal funding, but that requirement ended earlier this year.

More than 7.1 million people have been removed from Medicaid since the start of the unwinding process in April, according to KFF.

Several Medicaid directors from affected states said they were unaware they were out of compliance with federal rules until CMS informed them in August. They wished the federal agency had told them back in January, when they were developing renewal plans.

“That arguably would have been a great interval at which CMS could have really pointed that out to states,” said Kate McEvoy, executive director of the National Association of Medicaid Directors.

As a result of the glitch, families have been flagged as ineligible for Medicaid coverage even if a kid or other household member should still be individually eligible. Adults in most states that have expanded Medicaid qualify for the program if they make up to 138 percent of the federal poverty level while kids can still be eligible at up to 200 or 300 percent, depending on where they live.

The system errors identified by CMS led to children in at least 18 states and Washington, D.C., losing coverage, while adult household members with different eligibility statuses lost coverage in another 22 states. Some had both issues, and 23 states and territories had neither.

Daniel Tsai, deputy administrator and director of the Center for Medicaid & CHIP Services at CMS, said the agency doesn’t know how many of the 500,000 who lost coverage were kids, though it anticipates they represent a “significant portion.”

Of the states that have been able to estimate the number of affected individuals, Nevada and Pennsylvania reported the biggest coverage losses, with upward of 100,000 people affected in each state. Nevada health officials on Friday announced they reinstated coverage for about 114,000 people who lost coverage because of the problem, while Pennsylvania, which is still determining a final number of people affected, is working on next steps for reinstatement and has implemented a manual change to process cases at the individual level.

A spokesperson for the Pennsylvania Department of Human Services added that the state has been "operating under a CMS-approved unwinding strategy plan that included approval of the eligibility determination at the household level, since April."

In West Virginia, it took extensive legwork — working with their systems vendors and eligibility workers — to even find out if they had a problem, Cindy Beane, West Virginia’s Medicaid director and the National Association of Medicaid Directors' board president, said.

“If you would’ve asked me before I got that letter, are we in complete compliance, I would have said yes,” said Beane, whose state removed about 5,500 kids in error because of the systems issue. “It was never clear that this is against the rule or against the regulation, because if it was, we would have been doing it differently a long time ago.”

CMS will meet with each of the 29 states and Washington, D.C., to implement a fix and bring them into compliance with federal requirements, Tsai said. The agency anticipates that some of the states will have a fix in place this month, prior to the next round of disenrollments, while others may need multiple months to resolve the problem.

The agency has given states several strategies for addressing coverage losses while they implement solutions, including temporarily suspending renewals for multimember households or delaying scheduled renewals for 12 months for affected individuals. States may not begin processing renewals for affected individuals until the problem is resolved.