Medicaid Rules for Locking People Out of Coverage (“Lock-Outs”)
Several recent state waiver proposals have included punitive “lock-out” provisions. In some cases, lock out periods are used to enforce premiums and work requirements. Other states have proposed broad lockout requirements that would apply to any beneficiary who fails to complete the annual eligibility redetermination process by a deadline or who fails to report a change in income or other “change in circumstance”.
For lockouts linked to premiums or work requirements, if beneficiaries are unable to pay their premiums or meet work requirements, they are disenrolled from coverage and barred from re-enrolling, even if they can subsequently pay their premiums or meet their work requirements within the lock-out period. Similarly, for states that have requested authority to lock enrollees out of coverage for failure to complete renewal paperwork on time or not promptly reporting changes in circumstances, a lockout would prevent them from regaining eligibility during the lockout period regardless of their underlying eligibility.
Lock-out periods are impermissible under Medicaid law and run counter to the objectives of the Medicaid program, which is to provide medical assistance to low income people
Section 1115 waivers must promote the objectives of the Medicaid program. Those objectives, set out in Medicaid law, are to furnish medical assistance to low income individuals. Locking people out of coverage is antithetical to Medicaid’s goals—it keeps a Medicaid-eligible person from receiving medical assistance. Under the Obama administration, CMS noted, “exclusions from coverage, such as lockouts, are not permitted under Medicaid law.”
Under the Obama administration, CMS did approve lock-out provisions for non-payment of premiums in Indiana’s Medicaid expansion waiver, HIP 2.0. That approval was unique for several reasons: 1.) the program was based on and expanded an existing waiver program, HIP 1.0 2.) it included rigorous evaluation and failsafe measures, and 3.) the lock-out provision did not apply to individuals below 100 percent of poverty.
Arguments against Locking People out of Medicaid Coverage
Lock-outs will create disruptions in care leading to poor health outcomes and increased costs for individuals
The vast majority of Medicaid enrollees locked out of coverage will become uninsured, with those below 100 percent of poverty particularly at risk, because they do not have access to marketplace coverage. Multiple studies have found that regular and ongoing access to health care reduces preventable hospitalizations for people with chronic diseases such as diabetes and heart disease
In addition, lock-outs will interfere in treatment for people with mental health and substance use disorders, where continuity of care is particularly important. In states battling the opioid epidemic, lock-outs will undercut efforts to provide comprehensive addition treatment.
Lock-outs will create increases in increased in hospital uncompensated care costs, increasing costs for state and local governments
Uncompensated care is care that is provided to individuals (typically uninsured) who cannot afford to pay their medical bills. When hospitals provide uncompensated care, they are able to defray some of these costs through reimbursement from state, local and federal sources. State and local governments are the second largest funding source for uncompensated care, making up forty percent of all subsidies for hospital uncompensated care. Ensuring continuous Medicaid coverage allows states to save money by lowering their uncompensated care costs.
Lockouts tied to failure to renew eligibility will result in huge coverage losses
Medicaid is the only type of health insurance that requires annual renewal of eligibility documentation. And in many states the renewal process results in many people briefly losing coverage and coming back on Medicaid as documentation or mailing address issues with the renewal process are resolved, often called “churn”. Percentages of people churning on and off Medicaid at renewal generally range from 25% to as high as 50%.
A lockout at renewal will mean that 25% to 50% of Medicaid enrollees will lose coverage for six months every year, or longer if they fail to immediately reapply for Medicaid as soon as it becomes available. This will dramatically increase the number of uninsured people—just as such a policy would if it were applied to employer or Medicare coverage.
Using lock-outs as a way of enforcing work requirements is counterproductive. Lock-outs make it harder for Medicaid beneficiaries to look for work and maintain steady employment.
Some states have proposed locking-out enrollees who do not meet a Medicaid work requirements. That will make it harder for individuals to get healthy so that they can work. In surveying beneficiaries of the Medicaid expansion, Ohio reported that three-quarters of beneficiaries who were looking for work said Medicaid made it easier for them to do so. For those who were currently working, more than half said that Medicaid made it easier to keep their jobs. By locking individuals out of coverage for failure to meet work requirements, states make it harder for people search for, obtain and maintain steady employment.
Lock-outs for failure to complete renewal paperwork will impose unlawful barriers to care for vulnerable low-income Medicaid populations
Locking people out of coverage for failure to complete paperwork on time will not encourage timely redeterminations. Instead, it will impose substantial hardship on those most in need of Medicaid coverage. Low-income Medicaid enrollees can face multiple challenges to completing the sometimes lengthy redetermination processes, including difficulty receiving mail, lack of a fixed address and chronic or intermittent homelessness. Medicaid is likely to be all the more important during a time in which someone has difficulty completing redetermination paperwork—for example during an episode of acute illness.
Lock-outs are designed to punish people when they are already facing hardship, making it even more difficult for them to get back on their feet and re-enrolled in Medicaid. It is a not-so-subtle way of pushing people who should be eligible for coverage off of that coverage, and keeping them off through illegal barriers that serve only to hurt the physical and financial health of state residents, not to mention local governments.