Reducing Medicaid waste by addressing multi-state eligibility challenges

United States citizens, by law, cannot receive and use Medicaid benefits in multiple states. Yet the technologies and processes used by the federal government and state agencies to determine Medicaid eligibility don’t adapt quickly when people relocate. It’s surprisingly frequent that multiple states are paying for Medicaid benefits for the same individual because of this bureaucratic tangle—and the inefficiency costs American taxpayers hundreds of millions of dollars each year.

To date, managed care organizations (MCOs) receiving Medicaid payments have had little incentive to address these issues. However, with growing federal scrutiny of government spending, the stakes have changed. As efforts to review federal programs and identify cost-saving opportunities continue, a key focus should be reducing the waste that occurs each year due to Medicaid multi-state eligibility.

The scope of the problem

Multi-state Medicaid eligibility is such an intractable challenge that the U.S. Department of Health and Human Services’ Inspector General’s office (OIG) has an entire page dedicated to its reports on the subject, which go back decades.

The title of a report published in 2022 lays bare the extent of the problem: “Nearly All States Made Capitation Payments for Beneficiaries Who Were Concurrently Enrolled in a Medicaid Managed Care Program in Two States.” The OIG’s audit found improper multi-state payments totaling $72.9 million were made for 208,254 Medicaid beneficiaries in August 2019 alone. A year later, in August 2020, the OIG uncovered $117.1 million in improper payments for 327,497 beneficiaries.

Other audits illustrate not only how expensive Medicaid multi-state eligibility can be, but also how complex. One report concluded that, in August 2018, Ohio made 47 improper capitation payments for beneficiaries concurrently enrolled in 17 different states. Another audit found that, in August 2020, Florida made 44 improper payments for beneficiaries concurrently enrolled in 21 different states.

In another instance, HHS-OIG partnered with the Office of the Washington State Auditor to investigate concurrent enrollees in Washington’s Medicaid program. The state’s report reinforced many of the federal findings and underscored the state’s limited ability to prevent and eliminate these duplications.

The start of a solution

In just about every case, the OIG recommends that CMS use existing tools and processes to help reduce these improper multi-state Medicaid payments. Two of the systems the OIG cites most are the Transformed Medicaid Statistical Information System (T-MSIS) and the Public Assistance Reporting Information System (PARIS). But even if CMS were to take these recommendations, the systems are imperfect solutions.

As CMS notes in its response to the “Nearly All States” report, the T-MSIS submission cycle between states and CMS has a lag of about a quarter. Relying on T-MSIS means that the best CMS can do is identify already wasted capitation payments—not prevent them from happening.

PARIS, too, is a reactionary system, not a proactive one. Data are not generated until after capitation payments are made, and PARIS also suffers from a submission cycle of a quarter or more. Many improper payments can be made before they even show up in PARIS.

A holistic approach to CMS tech modernization

CMS must consider comprehensive improvements to federal and state data systems instead of their current piecemeal, siloed approach. Here are a few places CMS can start:

• Leveraging existing technology systems, vendors, and contracts: “Bolting on” to existing processes and contracts means there’s no big tech stack to engineer or new systems to purchase. The data and tools are already present.
• Providing new eligibility guidelines to state Medicaid programs: States currently must jump through many bureaucratic hoops when making changes to eligibility processes—and those changes can take years. Expediting states’ ability to adapt their eligibility processes to new guidelines will enable swift changes to the status quo.
• Require MCOs to match eligibility records across states: Because MCO contracts are between the state agencies and the insurers, CMS has never mandated that MCOs take this important step. Likewise, because state agencies don’t have access to other states’ data and do not set federal policy, states have never implemented this requirement. As states have increasingly shifted eligibility management responsibilities to MCOs, the requirement to identify and eliminate duplicative, cross-state coverage should lie with these contracted insurers who receive monthly capitation payments for each member.

The pieces are on the table to solve the challenge of multi-state Medicaid eligibility and save the federal government—and taxpayers—hundreds of millions of dollars each year. In the past, these pieces were never put together. Now, though, there is political will to do so and an emphasis on rooting out waste, fraud, and abuse wherever it can be found. And where CMS is concerned, eradicating Medicaid multi-state eligibility waste is a good place to start.

Learn more about ICF’s approach to safeguarding healthcare delivery and how we’re driving innovation, efficiency, and value for federal agencies’ digital modernization initiatives.