Every state is struggling with the explosive growth and cost of its Medicaid program. Illinois, however, found a way to reduce Medicaid spending significantly, freeing up money for other important projects—or better yet, tax cuts.
Medicaid, the government health-insurance program for the poor and disabled, covered 72.2 million people for at least one month in 2012, according to estimates from the Department of Health and Human Services.
But enrollment is growing quickly. The Centers for Medicare and Medicaid Services reports that Medicaid and the Children’s Health Insurance Program (CHIP) enrollment is up by about 8.7 million people—nearly 15%—since the Affordable Care Act’s October 2013 rollout. Total Medicaid spending was about $432 billion in 2012. The federal government provided $250 billion, or a bit more than half, but states paid the rest.
For many states, Medicaid is already their single largest expenditure, and now it is demanding more, forcing state governments to limit or reduce spending in other important areas like education and welfare.
Enter the Illinois solution. In 2013, the state faced a Medicaid budget shortfall of $2.7 billion. Springfield had begun implementing some reforms, such as shifting more Medicaid recipients into private managed-care organizations, but that wasn’t enough.
So Illinois state Rep. Patti Bellock garnered bipartisan support to pass legislation in 2012 that included several Medicaid reforms. One of the most important was a provision to establish the Illinois Medicaid Redetermination Program to “redetermine” if Medicaid enrollees were still eligible to participate.
The federal government requires states to do an annual audit of the Medicaid rolls to ensure that participants are eligible, but in most states few people are removed. Ms. Bellock wanted to use an outside, private firm, Virginia-based Maximus, to audit the state’s 1.3 million Medicaid case files—which represents about 2.7 million individuals. The company has more extensive databases than the state and would likely identify more ineligible Medicaid beneficiaries.
Maximus recommended removing 249,912 cases by the end of February 2014, according to the state. By law, state employees had to review the recommendations and decide if cancellation is appropriate. The state removed 148,283 cases—about 234,000 individuals, as many cases represent families—from the Medicaid rolls.
Then came the lawsuit. The American Federation of State, County and Municipal Employees filed suit claiming that most of the work should be done by state bureaucrats, not a private company. A judge agreed, and Maximus’s role has since been reduced significantly. Yet the state has continued to identify people who are not eligible for Medicaid. According to state data, 173,469 Medicaid cases were canceled between February and September.
Not all of the cancellations were the result of fraud. Many occurred simply because the Medicaid recipient did not respond to the state’s repeated inquiries. Or the beneficiary might have gotten a job or a raise or started receiving health-care coverage through a spouse and therefore was no longer eligible for Medicaid. Or the beneficiary moved out of state without realizing that Medicaid is a state-based plan. And the Illinois audit found that more than 8,000 dead people were still on the state’s Medicaid rolls.
The state has struggled to determine how much money the redetermination process has saved because Medicaid covers different populations with vastly different health-care costs. For example, the Kaiser Family Foundation estimates that Illinois spends about $2,630 a year on each covered child, and $3,717 on their mothers. Those groups make up the majority of Medicaid beneficiaries. Aging and disabled Medicaid recipients, on the other hand, are much more costly—on average $10,734 and $17,955, respectively. Clearly, removing thousands of cases from the rolls saves a lot of federal and state taxpayer money.
The redetermination process is not a one-shot effort. Every day, thousands of people become eligible for Medicaid, and thousands no longer are. That process will be exacerbated by the president’s Medicaid expansion: For example, the Foundation for Government Accountability points out that as of September 477,000 adults newly eligible under the ACA have already signed up in Illinois, and that number is sure to grow.
While Illinois primarily tackled Medicaid, reform in Pennsylvania has included other welfare programs. As secretary of the state’s Department of Public Welfare, Gary Alexander removed some 220,000 people from the welfare rolls in 18 months with the Enterprise Program Initiative, which saved the state an estimated $710 million.
Other states facing serious Medicaid budget challenges would do well to consider similar efforts to fight fraud and waste. They have bipartisan appeal, because getting ineligible beneficiaries off the rolls allows the state to use that money for other purposes—or return it to taxpayers.