Administration Effectively Rescinds ‘Families First’ Medicaid Continuous Enrollment Protection

On October 28, the departments of Health and Human Services (HHS), Labor, and Treasury posted an interim final rule, which became effective on its November 6 Federal Register publication, that implements various laws applicable to the federal government’s pandemic response. Contained in the rule are major, new limitations on the Medicaid coverage protections contained in the Families First Coronavirus Response Act (FFCRA).

Katie Keith’s recent post reviews those aspects of the rule that focus on private immunization coverage and on changes made to the Affordable Care Act’s Section 1332 waiver process. Here we examine the rule’s Medicaid provisions. Comments are due on January 4, 2021.

FFCRA increases the level of federal Medicaid funding to states during the COVID-19 pandemic public health emergency. However, to qualify for this additional funding, states must comply with the terms of the law. Among those terms are two that are the subject of the rule. First, states must cover COVID testing and treatment, including vaccines and their administration without cost sharing. Second, states must provide continuous Medicaid enrollment throughout the pandemic, regardless of whether, under normal circumstances, life changes might render enrolled beneficiaries ineligible. The new rule significantly weakens these two protections while also imposing major new burdens on states.

To understand what the new rule does, some background on Medicaid’s basic eligibility and coverage rules is necessary, since the Families First amendments essentially interact with a complex underlying statute.

Medicaid Eligibility Pathways and the Terms of Coverage Under Each Pathway

Medicaid provides dozens of eligibility pathways, and each eligibility pathway is tied to specific standards regarding what constitutes “medical assistance”—that is, the scope of services and benefits to which any particular eligibility group is entitled. The federal definition of what constitutes “medical assistance” for each federally recognized eligibility group also operate as a federal limit on the extent of federal financial assistance for any particular coverage design for that eligibility group. For purposes of the meaning of “medical assistance”, the coverage rules that normally apply to the major eligibility groups can be summarized as follows:

Traditional Medicaid Eligibility Groups

What can be thought of as traditional Medicaid eligibility groups consists of: (1) families with dependent children whose eligibility historically has been linked to cash welfare assistance under the [now repealed] Aid to Families with Dependent Children (AFDC) program; (2) people receiving SSI benefits on the basis of age or disability; and (3 and 4) low income children and pregnant women. These 4 groups are entitled to a comprehensive range of benefits. For adults, certain benefits are required while others, including preventive services such as immunizations, are optional. For children up to 21 all benefits and services falling within the definition of “medical assistance” are required as part of Medicaid’s early and periodic screening, diagnostic and treatment (EPSDT) benefit. Thus, immunizations for children and adolescents are required.  Pregnant women are entitled to pregnancy-related benefits throughout the pregnancy/postpartum period; this statutory bundled benefit encompasses all items and services necessary for the health of a pregnant woman and fetus or necessitated by conditions that arise during pregnancy. As such, immunizations to prevent disease that could affect pregnancy and infants would be covered, given the evidence regarding the impact of COVID on pregnancy and newborn health. However, state immunization coverage policies for non-pregnant adults vary widely, in terms of whether any coverage is offered and if so, for which vaccines.

The bottom line is that all medically necessary care related to COVID-19 testing, treatment, including COVID-19 immunizations either must — or could — fall within the scope of coverage for these beneficiary groups.

Affordable Care Act Medicaid Expansion Adults

Adults covered as part of the ACA’s adult expansion group (working age, incomes up to 138 percent of the federal poverty level and ineligible under a traditional eligibility category) are entitled to comprehensive coverage through “alternative benefit plans” that track the ACA essential health benefit standard and thus include COVID testing, treatment, and immunizations.

Eligible Populations Covered for Limited Benefits Only

Federal Medicaid law also creates several distinct eligibility groups whose entitlement is limited to specified benefits. For example, states can cover low-income Medicare beneficiaries for Medicare premiums and cost-sharing. Similarly, states have the option to extend coverage limited to family planning services to low-income sexually active people ineligible for full benefits through the traditional or ACA expansion groups. States also have the option to extend limited coverage for tuberculosis-related treatment to otherwise-ineligible people infected with tuberculosis.

Because these groups are entitled only to limited benefits tied to a specific diagnosis or health care need, COVID testing, treatment and immunizations would be excluded. The CARES Act specifies that states electing to extend FFCRA’s Medicaid testing coverage option for the uninsured can treat limited benefit coverage groups as uninsured for purposes of covering and paying for testing and testing-related services. However, the FFCRA uninsured testing option does not include either treatment or immunizations. (The HEROES Act, which passed the House in May, would have added these benefits)

But family planning limited coverage also offers both CMS and states considerable coverage flexibility, an important consideration given that several million people depend on this eligibility category for coverage. For decades, the federal government has defined “family planning” through guidelines, which identify services such as exams, contraceptive counseling, contraceptives, pregnancy testing and counseling, and testing for sexually transmitted infections. Additionally, CMS recognizes “family planning related” services that states also can offer for this limited coverage group;  these services consist of a range of treatments, the need for which is identified during a family planning visit.

Family planning services are federally funded at a special enhanced 90 percent federal funding rate, while the federal government will pay for family planning-related services at a state’s normal federal matching rate. Immunizations needed to protect reproductive health and furnished during a family planning visit thus appear to qualify for federal funding at a state’s normal federal Medicaid matching rate as a related service.

Medically Needy ‘Spend Down’ Eligibility  

Medicaid plays an especially important role in covering people whose incomes exceed normal eligibility levels but who incur large bills for extensive physical, developmental, or mental health needs. States have broad flexibility to cover spend-down beneficiaries for a full range of services and benefits.

Medicaid Enrollment Instability

Coverage instability has been a perennial challenge for Medicaid. Even small shifts in health, financial status, or family living circumstances can cause people to lose eligibility completely or shift to more limited coverage. For example, a woman enrolled in Medicaid based on pregnancy can lose comprehensive benefits postpartum but still qualify for limited family planning coverage.

The ACA simplifies and streamlines Medicaid enrollment and renewal. Under the ACA, states also can opt to provide 12 months of continuous enrollment for children. Furthermore, longstanding due process safeguards require that, when states terminate or reduce coverage, they must provide beneficiaries with timely advance notice of intended action and the opportunity for a pre-reduction hearing. Despite these reforms, unstable coverage remains a program feature.

The FFCRA Challenge

The challenge presented by FFCRA is to integrate its maintenance of effort provisions into underlying law. How, exactly, do its continuous enrollment safeguards apply to the protected population? How do FFCRA’s coverage protections related to treatment and immunizations interact with Medicaid’s underlying coverage rules? These questions are not simply academic: enrollment and coverage protections for tens of millions of people are implicated, as is states’ entitlement to federal funding enhancement during the height of the pandemic. Furthermore, to the extent that CMS interprets COVID coverage protections as excluding certain eligibility or coverage groups, not only are the enhancement funds at risk but so might be basic federal Medicaid funding.

To receive the special 6.2 percentage point bump in federal Medicaid funding over the duration of the pandemic emergency period, states, as noted, must comply with certain conditions, among which are coverage of COVID testing and treatment, including vaccines and administration costs, without cost sharing, and continuous enrollment for people enrolled as of the date of enactment and through the pandemic emergency period. FFCRA’s Medicaid funding enhancement is available through the end of the quarter in which the public health emergency ends; as of early November 2020, the Health and Human Services Secretary’s recent extension of the emergency means that the emergency period lasts through March 31, 2021.

The CMS Rule

Despite these seemingly straightforward conditions regarding enrollment and coverage, the interim final rule (42 C.F.R. §433.400) undermines them in notable ways.

Excluding Federal Funding Altogether for Limited Eligibility Groups

FFCRA §6008(b)4) pertains to testing, treatment, and coverage of immunizations. CMS states that this requirement pertains to “most” coverage groups. CMS could have used its agency discretion to ensure that immunizations can be part of the limited benefit bundle for people whose Medicaid enrollment is tied to family planning or tuberculosis. But it has chosen not to do so. The effect of this interpretation is to entirely exclude federal funding—at any matching rate—for states that want to extend COVID immunization coverage to these special limited coverage groups.

CMS reached this conclusion because, it argues, FFCRA does “not amend the varying benefit packages” to which beneficiaries are entitled based on underlying law. CMS asserts that for these groups, there is no federal Medicaid funding for vaccine costs for these groups, whether at the normal or enhanced rate; thus, immunization coverage as a Medicaid benefit is not an option. Nor, as CMS points out, can federal Medicaid funding for the uninsured under FFCRA’s new uninsured eligibility option provide states with federal immunization Medicaid funding, since this new eligibility option applies only to testing and testing-related care, not immunizations.

Thus, CMS concludes, as with people who are completely uninsured, the only pathway to federal funding for COVID-19 immunizations would be for providers to bill the Health Resources and Services Administration (HRSA) uninsured fund. The HRSA fund is small ($1.3 billion), and the CMS rule would place added billing clinical management and administrative burdens on health care providers. CMS makes its exclusion clear through an accompanying toolkit issued on October 29.

Undermining the Continuous Enrollment Protection

The FFCRA continuous coverage protection (§6008(b)(3)) conditions the 6.2 percentage point funding enhancement on a guarantee that states will provide:

that an individual who is enrolled for benefits [under the state plan or through an 1115 waiver] as of the date of enactment [March 18, 2020] or enrolls for benefits [after March 18 and during the public health emergency period] shall be treated as eligible for such benefits [emphasis added] through the end of the month in which such emergency ends unless the individual requests a voluntary termination of eligibility or . . . ceases to be a resident of the State.

Originally, as CMS notes, the agency had interpreted continuous enrollment broadly, meaning that states could not alter eligibility or enrollment except where an individual voluntarily requested termination or moved to another state.

To be sure, this provision did create a challenge for people who fall into a limited coverage eligibility group and subsequently gain eligibility for more comprehensive coverage. CMS could have clarified that under these circumstances, beneficiaries always could request a redetermination, with termination of eligibility under the limited coverage group if eligibility under a comprehensive eligibility group were found to exist. (An example would be a woman eligible for limited family planning coverage because her income exceeds the 138 percent cutoff who then loses her second job and experiences an income drop sufficient to qualify for ACA expansion coverage.) CMS remains silent on this point, however.

Far more significant however, is what CMS has done, effective immediately, to downgrade continuous enrollment. Essentially, CMS has superimposed a limit on the reach of the protection – found nowhere in the statute – that excludes from the scope of the protection individuals who are not “validly enrolled” – a concept with no basis in law. According to CMS, the “validly enrolled” exception means that certain people fall outside the continuous enrollment protection entirely. Under 42 CFR §433.400, CMS defines this new concept as follows:

A beneficiary is not validly enrolled, and therefore not entitled to FFCRA if the agency determines the eligibility was erroneously granted at the most recent determination, redetermination, or renewal of eligibility (if such last redetermination or renewal was completed prior to March 18 2020) because of agency error or fraud (as evidenced by a fraud conviction) or abuse (as determined following completion of an investigation. . . ) attributed to the beneficiary or the beneficiary’s representative, which was material to the determination of eligibility.

Because this carve-out amounts to a hard stop on the protection, compliance is not a state option. Under the rule, states would be obligated to review all enrollments and renewals prior to March 18, reopening all cases and reexamining them for evidence of agency “error” or fraud and abuse. The Preamble to the rule notes that disenrollment for failure to be “validly enrolled” qualifies for due process advance notice and hearing protections, but the existence of the procedural protection does not alter the fact that millions of people enrolled prior to the March 18, 2020 will need to undergo redetermination in order to determine whether they are “validly enrolled”. That this is not a state option is made clear under §433.400, which states that:

A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination, redetermination, or renewal of eligibility (if such last redetermination or renewal was completed prior to March 18, 2020) because of agency error or fraud (as evidenced by a fraud conviction) or abuse following the completion of an investigation . . . . attributed to the beneficiary or the beneficiary’s representative, which was material to the determination of eligibility.

Furthermore, despite the clear language of the statute that entitles people to “such coverage” as they had on the date of enactment, the rule appears to require states to resume the eligibility redetermination process to review cases for the correct scope of coverage, as if there were no continuous coverage protection at all. For purposes of this rule, CMS—again cutting out of whole cloth—creates 4 new coverage categories for purposes of enforcing the federal funding enhancement:

Beneficiaries Entitled To Minimum Essential Coverage

For beneficiaries whose coverage category is comprehensive (which CMS defines as meeting the ACA’s definition of minimum essential coverage (MEC)). For this group, coverage encompasses COVID-19 testing, treatment and, at state option for adults, immunization.  

Beneficiaries Who Become Eligible For Medicare Savings Program Coverage

For beneficiaries who are “subsequently determined” to qualify only for limited Medicare coverage (known as the Medicare Savings Program and limited to Medicare premiums and cost sharing), states must move this group accordingly. Under this rule, a 64-year-old eligible for full Medicaid coverage on March 18, 2020 would lose “such coverage” in favor of limited Medicare benefits. Coverage for COVID testing, treatment, and immunization would be through Medicare; the individual would lose full Medicaid coverage in favor of Medicare, which could mean the loss of vision, dental, and hearing coverage and long term services and supports.

Beneficiaries Who Lose Comprehensive (MEC) Coverage In Favor Of Another Category That Nonetheless Covers Testing And Treatment

In the case of beneficiaries eligible for comprehensive “MEC” coverage who lose that basis of coverage but qualify under a category that includes COVID testing, treatment, and immunization (for example, a woman covered based on receipt of SSI who loses benefits but becomes pregnant), states will be expected to move these people to the new category as long as it continues to include COVID-19 coverage.

Beneficiaries Whose Eligibility Covers Testing And Treatment And Immunization But Who Move To A Limited Coverage Category

For this group (e.g., a pregnant woman who, following pregnancy, would remain eligible only for limited family planning benefits), a state would be required maintain her coverage as a pregnant woman with more comprehensive coverage.

Thus, not only does the rule excise people who are not “validly enrolled” from the FFCRA protections, but it also creates a new, four-part maze of coverage groups—classifications that exist nowhere in law—and then requires states to start shuffling people around, wholly ignoring the FFCRA continuous enrollment protection for “such benefits.” Nowhere does CMS state that this reshuffling rule amounts to an eligibility redetermination that triggers an opportunity to request a hearing—a critical protection for people moved to a narrower group, such as the near-elderly who are forced to move to Medicare Saving and thereby lose full Medicaid coverage.  

In its regulatory impact analysis, CMS provides no estimate of the number of people who could lose coverage as not “validly enrolled.” Nor does CMS estimate the impact of moving people (particularly the near-elderly) out of comprehensive Medicaid enrollment, claiming that the impact of its policy cannot be disentangled from normal state operational decisions:

It would be highly challenging to estimate specific cost savings resulting from this IFC because such an estimate would be almost entirely dependent on state behavior under the unique circumstances of the PHE for COVID-19. First we believe that some savings may result from transitioning beneficiaries to different eligibility groups with greater cost sharing or beneficiary liability. However, we know that states have faced both system and operational constraints that may prevent them from processing routine actions, such as transitioning a beneficiary from one group to another following a change in circumstances. A state that has been processing eligibility renewals and redeterminations during the PHE may be able to make such transitions relatively quickly, while a state that has been unable to process changes without violating the requirements for receiving the temporary FMAP increase may need more time to begin transferring beneficiaries between groups.

Where Matters Stand

The rule takes effect on publication, meaning that states must come into compliance with these new and confusing requirements that appear to contravene both FFCRA and its underlying purpose. Under the rule’s terms, states will have to restart the redetermination process, redetermine eligibility, move people from one coverage category to another—monitoring changed circumstances in the middle of a pandemic—and ultimately, redetermine enrollments prior to March 18, 2020 to identify those that do not amount to a “valid enrollment”. Beneficiaries “validly enrolled” will presumably retain their protections, while those not “validly enrolled” may be the subject of a fraud and abuse investigation or removed because of “agency error.”

People whose enrollment is linked to comprehensive coverage are now under threat, particularly in the case of near-elderly Medicaid beneficiaries who tip into the Medicare Saving program. Furthermore, the potential for mistakes and misclassifications likely increases significantly given the confusing welter of new rules, the threat of enhanced funding denials, and the chaotic conditions under which many state agencies are attempting to operate.

These results are precisely what Congress intended to avoid, not only for beneficiaries but for states. But these are the likely consequences of this rule, the impact of which begins even as the comment period proceeds.