Unwinding Provisions in the 2023 Consolidated Appropriations Act

Manatt Health 

Introduction

After weeks of negotiations during the lame duck session, Congress passed the Consolidated Appropriations Act, 2023, an omnibus funding package that includes government appropriations through September 30, 2023 as well as a number of health policy provisions. Among the health policies included in the package, section 5131 of the legislation provides a fixed end date for the Medicaid continuous coverage guarantee (March 31, 2023), a gradual phase down of the Families First Coronavirus Response Act (FFCRA) enhanced federal match rate, and new conditions, reporting requirements, and enforcement mechanisms to prioritize coverage retention and smooth coverage transitions during the “unwinding.”

By providing certainty on timing of the end of the continuous coverage guarantee and federal resources to support states, Congress has directly responded to calls from states and other stakeholders, while generally maintaining the Centers for Medicare & Medicaid Services (CMS) rules of the road^[1] with respect to addressing eligibility and enrollment actions that have been paused during the COVID‑19 public health emergency (PHE). While states will need to take action to comply with the new conditions and reporting requirements, they can now confidently solidify their unwinding plans and execute on strategies that are foundational to ensuring continuity of health coverage and care at the end of the continuous coverage guarantee.

Overview of Unwinding Provisions

Currently, as a condition of receiving FFCRA’s 6.2-point bump to the federal Medicaid match rate, states are prohibited from terminating or reducing benefits for most Medicaid enrollees during the COVID-19 PHE.^[2] The omnibus legislation makes several key changes to the existing parameters, including timing for unwinding; provisions described below will take effect on April 1, 2023.

End Date for Federal Medicaid Continuous Coverage Requirement. The legislation amends FFCRA section 6008 to change the end date for continuous coverage from the end of the month in which the PHE ends to March 31, 2023. This change provides states with approximately 100 days to make their final preparations for the start of unwinding on April 1, 2023—a longer period of time than the 60-day notice that the federal government had previously committed to provide before the end of the PHE. States may begin the processing of their pending redeterminations on April 1, 2023 and are expressly authorized to take up to 12 months to initiate redeterminations. This time period is consistent with existing CMS guidance on unwinding, which requires states to initiate all pending redeterminations within 12 months and complete all renewals within 14 months following the expiration of the continuous coverage requirement.

Phasing Out the Enhanced Federal Medical Assistance Percentage (FMAP). The legislation also delinks the FMAP bump from the PHE and provides for a phase-out of enhanced funding over nine months for states that adhere to certain conditions (see below).^[3] Under the omnibus spending package, the enhanced FMAP will decline over time as described in the following table:

Whereas FFCRA’s enhanced FMAP would have expired at the same time as the continuous coverage requirement, this schedule provides for a continued, albeit reduced, enhanced FMAP during the first nine months of the unwinding period.

The legislation produces savings based on ending the continuous coverage requirement and states redetermining eligibility (and terminating coverage for those no longer eligible) earlier than they would have if the expiration date for continuous coverage remained linked with the end date for the PHE, which had been assumed by the Congressional Budget Office to end in July 2023. Savings will be used in part to fund other Medicaid coverage priorities, including making permanent the postpartum coverage state option and requiring all states to establish 12 months continuous eligibility for children.

Conditions on Enhanced FMAP During the Unwinding Period (April 2023 – December 2023).

Receipt of enhanced FMAP from April 1, 2023 to December 31, 2023, will be contingent upon the following new conditions:^[4]

• States must conduct eligibility redeterminations and renewals in compliance with federal requirements and any other strategies approved (or required at a later date) by the Department of Health and Human Services, such as temporary section 1902(e)(14) waiver flexibilities.^[5]
• States must “attempt to ensure” they have up-to-date enrollee contact information (including mailing addresses, phone numbers, and email addresses) by using the United States Postal Service National Change of Address Database, state health and human services agencies, or other reliable sources of contact information.
• States must not disenroll anyone who is determined ineligible for Medicaid based on returned mail, without first making a good faith effort to contact the individual using more than one modality (e.g., telephone and email).

In addition to these conditions regarding unwinding, the enhanced FMAP will, throughout the phase-down period, remain subject to FFCRA section 6008 maintenance of effort requirements, including that: state eligibility standards, methodologies, or procedures shall not be more restrictive than those in place as of January 1, 2020; premiums shall not exceed the amount of premium levels as of January 1, 2020; and, states may not impose cost-sharing for testing services and treatment of COVID-19. Related to premium payment, with the end of the continuous coverage guarantee in April 2023, states will be permitted to increase individual premiums for enrollees who have a change in circumstances, and terminate coverage for individuals who fail to pay premiums.

Reporting Requirements During the Unwinding Period (April 2023 – June 2024).

The omnibus legislation also establishes new reporting requirements—beyond those required of states in the existing Renewal Distribution Report and Unwinding Data Report—regarding eligibility and renewal processes for Medicaid, the Children’s Health Insurance Program (CHIP), and the marketplace, in an effort to improve transparency and support CMS oversight during the unwinding process. From April 1, 2023 through June 30, 2024, states must submit to CMS a monthly report—which will be made public—detailing activities related to eligibility redeterminations, as described below. These reporting requirements include the following and apply to all states, regardless of whether they comply with the conditions for enhanced FMAP during unwinding.

• With respect to both Medicaid and CHIP, the number of:
  • Eligibility renewals initiated.
  • Enrollees renewed, including a breakdown for ex parte renewals^[6] “total” renewals that would have resulted from successful completion of renewal forms/requests for information.
  • Enrollees whose coverage was terminated, to provide both an overall number and the number specifically for procedural reasons.
• The number of individuals who were enrolled in CHIP as a result of the renewals.
• The state Medicaid agency’s total call center volume, average wait times, and average abandonment rates.
• The following marketplace-related information, unless CMS reports this information on the state’s behalf:
  • For states that operate a state-based marketplace (SBM) and have an integrated eligibility determination system for healthcare affordability programs:
    • The total number of individuals who were determined eligible for a qualified health plan (QHP) or, if applicable, the Basic Health Program (BHP).
    • Of these, the number who selected QHP on the marketplace or were enrolled in a BHP plan.
  • For states that do not have an integrated eligibility determination system (including all states with federally-facilitated marketplaces):
    • The number of individuals whose accounts were transferred from Medicaid to the marketplace or BHP.
    • Of these, the number who were determined eligible for a QHP or the BHP.
    • Of these, the number who made a QHP selection or were enrolled in a BHP plan.

Federal Enforcement Mechanisms During the Unwinding Period (April 2023 – June 2024).

The omnibus vests CMS with targeted oversight powers related to eligibility redeterminations and reporting during the unwinding period. These powers supplement and, in some cases, overlap with CMS’ existing enforcement mechanisms.

• FMAP reduction for failure to report required information. In the period from July 1, 2023 through June 30, 2024, if a state fails to comply with the reporting requirements described above, the state’s FMAP for that quarter will be reduced by 0.25 percentage points, plus an additional 0.25 points for each prior quarter of noncompliance.
• Corrective action plans (CAPs) and additional penalties. If CMS determines that a state has failed to comply with the reporting requirements, or with any “Federal requirements applicable to eligibility redeterminations,” CMS has the discretion to impose a CAP. The legislation establishes timelines for submission, CMS approval, and implementation of the CAP. If a state fails to submit or implement its CAP, CMS may then:
  • Order the suspension of all or some procedural terminations^[7] of eligibility until the state takes appropriate corrective action.
  • Impose civil monetary penalties of up to $100,000 for each day a state is out of compliance.

Considerations for States

The omnibus legislation provisions on unwinding the Medicaid continuous coverage guarantee have broad implications for state Medicaid agencies and marketplaces, and for CMS. States will require guidance from CMS as they work to operationalize the new conditions and comply with the new reporting requirements.

• Unwinding Timeline. With an end-date certain for continuous coverage and the gradual phase down of the enhanced FMAP, states are now better equipped for the resource-intensive work ahead of addressing pending eligibility and enrollment actions. States can update their member communications and refine Medicaid budget estimates to reflect expected case load and the continued FMAP bump during the first nine months of unwinding. CMS will likely treat the April 1, 2023 start date for unwinding established in section 5131 in the same manner as it would have under FFCRA, though states should expect guidance from CMS clarifying key timelines for initiating eligibility and enrollment actions and submitting required documentation/reports.
• New Conditions. States will also need CMS guidance regarding the agency’s interpretation of new unwinding conditions for receipt of the enhanced FMAP and how those conditions will be implemented. At a minimum, states will need to understand how CMS will identify, define, and enforce non-compliance with existing eligibility and enrollment requirements in Medicaid (including renewing eligibility on an ex parte basis); what it means to “attempt to ensure” to have up-to-date enrollee contact information; and the amount of time a state should wait before contacting an enrollee using a second modality.
• New Reporting Requirements. Some states will be better positioned than others to meet the new reporting requirements detailed in the legislation. State Medicaid agencies will need to review their performance indicator data and account transfer submissions to CMS to ensure that they are or will be able to submit robust and accurate data that meets new reporting conditions. SBMs and BHPs will need to prepare for new reporting of account transfer, eligibility determination, and plan selection data for both Modified Adjusted Gross Income (MAGI) and non-MAGI enrollees to CMS. Notably, CMS will need to confirm its intention to report required marketplace data on behalf of states that rely on HealthCare.gov. Given the high stakes tied to reporting, states can expect CMS to provide technical assistance and clarify expectations—including the timing for data collection and the way in which the data will be presented publicly.
• Federal Enforcement Mechanisms. As noted above, Congress has provided to CMS new, targeted oversight and enforcement tools. The threat of an FMAP reduction and CAP/other penalties will provide powerful incentives for states to ensure compliance with the new reporting requirements and existing federal eligibility redetermination requirements. It remains to be seen how and the degree to which CMS will exercise these enforcement actions.

Conclusion

With an end-date now certain for the Medicaid continuous coverage guarantee, states have the next three months to redouble their efforts as they head into the final stretch of planning for the transition back to regular eligibility and enrollment operations. In order to build on the historic gains in coverage achieved as a result of the continuous coverage requirement and protect against disproportionate coverage loss for people of color, states can continue their work to ensure that strategies to maximize coverage retention for eligible individuals and smooth transitions to other coverage programs for people who are determined ineligible are in place, and that they are ready to thoughtfully execute on existing and new unwinding requirements.

[1] Also see CMS State Health Official (SHO) Letter #20-004.

[2] FFCRA Section 6008 increased states’ FMAP by 6.2 percentage points for the duration of the PHE, conditioned on states meeting the following requirements: (1) continuous coverage, under which states may not disenroll any Medicaid enrollees during the PHE; (2) the maintenance of effort, under which states may not impose “eligibility standards, methodologies, or procedures” more restrictive than those that were in place before the pandemic (January 1, 2020); and (3) a requirement to cover COVID-19 testing, treatments, and vaccines without cost sharing.

[3] This phase out of FFCRA’s FMAP bump is similar to a provision that was included in the original Build Back Better legislative package (but which was removed as that package was whittled down and ultimately enacted as the Inflation Reduction Act).

[4] These conditions build on existing CMS guidance. Also see New CMS Guidance on Expectations for Unwinding Federal Medicaid Continuous Coverage and CMS Guidance to States on Resuming Public Health Program Operations Post the COVID-19 PHE.

[5] See 42 CFR § 435.911, 42 CFR § 435.916, and 42 CFR § 457.343.

[6] “Ex parte” refers to the process by which renewals are done through electronic data sources without any required follow-up from the enrollee.

[7] Procedural terminations occur when potentially eligible individuals fail to respond to a state Medicaid/CHIP agency’s request for additional information as part of the redetermination process.