New CMS Rule on Medicaid Unwinding Clarifies CMS Enforcement Authorities and State Reporting Requirements

Julian Polaris and Kaylee O’Connor, Manatt Health

On December 6, the Centers for Medicare & Medicaid Services (CMS) published and made effective an interim final rule (IFR) with comment period regarding states’ ongoing unwinding efforts to redetermine eligibility for all Medicaid enrollees nationwide following the expiration of the continuous coverage requirement on March 31, 2023. The rule—titled “Medicaid; CMS Enforcement of State Compliance With Reporting and Federal Medicaid Renewal Requirements Under Section 1902(tt) of the Social Security Act”—interprets and implements the state reporting requirements and CMS enforcement authorities that Congress enacted last winter in the Consolidated Appropriations Act of 2023 (CAA), as codified in section 1902(tt). In many respects, the IFR either codifies or builds on CMS’ own prior sub-regulatory guidance on these issues.

Since the expiration of the Medicaid continuous coverage requirement, approximately 7.5 million individuals have been disenrolled from Medicaid and the Children’s Health Insurance Program (CHIP), 5.5 million (or 73%) of whom have lost coverage due to procedural reasons.^[1] Based on the preliminary unwinding data currently available, CMS notes that the rate of renewals resulting in disenrollments as well as the rate of disenrollments for procedural reasons are so far exceeding and set to outpace earlier projections by the Office of the Assistant Secretary for Planning and Evaluation.

CMS has already demonstrated that it will take action to address non-compliant state practices that create a risk of improper disenrollments; a notable example was CMS’ effort this fall to ensure that redeterminations are conducted at the individual—rather than the household—level.^[2] With this IFR, CMS seeks to clarify the specific oversight procedures it will use moving forward, should the agency identify non-compliant practices in individual states, including:

• Potential consequences for state non-compliance, as laid out in section 1902(tt):
  • Corrective action plans (CAPs), potentially followed by suspension of procedural disenrollments and/or civil monetary penalties (CMPs); and
  • For states that fail to report required information, a reduction in the state’s Federal Medical Assistance Percentage (FMAP).
• Mitigating factors CMS will consider before imposing these consequences, including potential harm to enrollees and unexpected circumstances beyond the state’s control.
• Technical clarifications for certain state reporting requirements.

For more information on this IFR, see CMS’ December 5 “All State” presentation. CMS is accepting public comments on the IFR until February 2, 2024.

CMS Oversight and Enforcement Authorities (42 C.F.R. §§ 430.3, 430.49, 435.928 and 45 C.F.R. Part 16)

The CAA vests CMS with targeted oversight powers to enforce existing federal redetermination requirements^[3] and reporting requirements during the unwinding period. These enforcement authorities are only applicable to state activities that occur from April 1, 2023, to June 30, 2024 (see table below). In the preamble, however, CMS reminds states that these targeted enforcement powers exist alongside, and do not supplant CMS’ existing authorities to monitor states for compliance with federal law, initiate compliance actions, and withhold federal funds for non-compliance.

The IFR interprets and implements these targeted oversight and enforcement powers related to unwinding.

Additional Procedural Details Regarding CAPs, Suspensions, and CMPs

Corrective Action Plans

In addition to reiterating the CAA’s timeline for state approval and CMS review of CAPs,^[4] the IFR confirms that CMS will notify states of CMS’ findings of noncompliance before requesting a CAP, and specifies the mandatory components of a CAP that will meet CMS approval, namely:

• The actions the state will take immediately to prevent further harm or risk to enrollees (e.g., reinstatement of coverage, suspension of procedural disenrollments, and adoption of alternative processes or procedures).
• Specific steps the state will take to ensure compliance.
• Key milestones and a detailed timeline for achieving compliance.
• A plan for communicating the actions described in the plan to CMS, state staff, and enrollees (if applicable).

Scope of Procedural Disenrollments Suspension and CMPs

For states that fail to submit or implement an approved CAP, the IFR outlines the parameters CMS will use in determining additional consequences.

• CMS will require a state to suspend procedural disenrollments commensurate with the findings of non-compliance, which could entail pausing procedural disenrollments in a targeted manner for affected populations, or pausing all procedural disenrollments statewide. Suspension will generally be required for states that fail to submit or implement a CAP.
• Should CMS opt to impose CMPs as well, the CMP amount will be tied to the duration of time for which a state is out of compliance:
  • Days 1 – 30: $25,000/day.
  • Days 31 – 60: $50,000/day.
  • Days 61+: $100,000/day (the statutory maximum).

The IFR signals that additional sub-regulatory guidance regarding the process CMS will use to collect CMPs and any operational requirements for states to remit payment of CMPs is forthcoming.

Dispute Resolution Procedures

The IFR specifies dispute resolution procedures for states that wish to contest CMS’ decision to suspend procedural disenrollments and/or impose CMPs, including an administrative appeal to the Health & Human Services Departmental Appeals Board,^[5] as well as the right to request reconsideration by the CMS Administrator, potentially followed by judicial review.

Mitigating Circumstances

Consistent with CMS’ authority to prioritize enforcement resources, the IFR explains that CMS will consider “mitigating circumstances” when determining whether to issue a CAP, suspend procedural disenrollments, or impose CMPs:

State Reporting Requirements and FMAP Reduction (42 C.F.R. §§ 435.927 and 435.928)

The CAA requires states to report on a timely basis to CMS (and CMS to make public) monthly data on various eligibility and renewal processes for Medicaid, CHIP, and the Marketplace, for the period from April 2023 to June 2024. During the December 5 CMS “All State” Call, CMS confirmed that the IFR does not impact the reporting requirements to which states are already adhering. Rather, the IFR codifies CMS’ existing guidance and provides certain technical clarifications.^[7]

The IFR also clarifies the financial penalties for states that fail to submit timely reports for the period from July 2023 through June 2024. In addition to the option of imposing CAPs, suspensions of procedural disenrollments, and/or CMPs, as described above, the CAA requires CMS to reduce the FMAP for states that fail to timely submit required reports. In the IFR, CMS explains that:

• States will be considered compliant with the unwinding reporting requirements if they comply with CMS’ existing guidance, and comply with any alternative processes approved by CMS in the event of a delay, provided the state makes a good faith effort to meet requirements.
• An FMAP penalty will apply to the state-specific FMAP defined at section 1905(b) (i.e., the state’s “regular” FMAP).
• The FMAP reduction starts at 0.25 percentage points, and increases by an additional 0.25 percentage points for each quarter of noncompliance—up to a maximum of 1 point—regardless of whether the quarters are consecutive.

Despite calls from advocates and other stakeholders for CMS to publish state unwinding data in a more timely manner, CMS reiterates in the preamble to the IFR that it plans to publish such data only “after a period of time to allow for data quality and validation reviews.”

Conclusion  

In the preamble to the IFR, CMS emphasizes its goal of continuing its collaborative approach to working with states to identify and remedy identified areas of noncompliance. Recognizing the need for CMS to prioritize oversight resources, this IFR clarifies how CMS will leverage the targeted enforcement authorities defined under the CAA. The rule does not create any new enforcement powers, but rather clarifies for states how CMS will exercise its existing powers upon identifying instances of non-compliance, including CMS’ rubric for prioritizing federal action based upon an assessment of risk to enrollees.

[1] The IFR newly defines “procedural disenrollments” as “a termination of eligibility and disenrollment from Medicaid for reasons that are unrelated to a State’s determination of whether the individual meets eligibility criteria to qualify for coverage, including for failure to return a renewal form or documentation needed by the State to make a determination of eligibility.”

[2] For more information, see this State Health & Value Strategies and Manatt Health resource, Conducting Eligibility Redeterminations at the Individual Level: State Diagnostic Assessment Tool.

[3] The IFR newly defines “Federal redetermination requirements” as “Federal requirements applicable to eligibility redeterminations outlined in § 435.916, including renewal strategies authorized under section 1902(e)(14)(A) or other alternative processes and procedures approved by CMS under section 1902(e)(14)(A) of the Act or section 6008(f)(2)(A) of the FFCRA.”

[4] Consistent with the CAA, the IFR provides that states must submit the CAP to CMS no later than 14 calendar days after receiving CMS’ written notice of the CAP. CMS, in turn, would need to approve or disapprove the CAP within 21 calendar days of the date of submission (otherwise the CAP would be deemed approved).

[5] An appeal does not lift a pause on procedural disenrollments nor does it stop CMPs from accruing.

[6] As an example of an underlying state reporting violation that might not impede CMS’ oversight of procedural disenrollments, the preamble cites a failure to report call center data.

[7] While states will still be required to report for each month starting April 2023 through June 2024, the IFR allows states to submit monthly reports after June 30, 2024, to provide time for states to compile and submit their data. Additionally, with limited exceptions (total CHIP enrollment and certain call center data), the IFR limits state reporting to only individuals whose eligibility had been redetermined by the Medicaid program.