J July 2012 Implementing Eligibility Changes under the ULY 2010 Affordable Care Act: Issues Facing State Medicaid and CHIP Programs Number 1 in the Series, “Eligibility Determination Using Modified Adjusted Gross Income: Implications for Enrollment under Health Reform” Cheryl A. Camillo Mathematica Policy Research • Washington, DC INTRODUCTION HISTORICAL ELIGIBILITY PRACTICES The Affordable Care Act (ACA) includes many When the Medicaid program was created in 1965, provisions designed to expand and streamline eligibility was limited to low-income families with Medicaid eligibility. The ACA extends coverage to dependent children receiving cash assistance under the non-disabled, non-elderly citizens with income under Aid to Families with Dependent Children (AFDC) 133 percent of the Federal Poverty Level (FPL); welfare program. Generally, state offices used their adopts new methodologies for determining and AFDC application materials, policies, and procedures, renewing eligibility; and requires establishment of a including the methodologies for counting income and streamlined process to allow state Medicaid programs resources, to determine Medicaid eligibility. For to coordinate seamlessly with other insurance instance, if state AFDC policy excluded 18-year-old affordability programs and affordable health insurance full-time students from being eligible, Medicaid policy exchanges. also did. These provisions are intended to change the Medicaid Congress gradually expanded the Medicaid program to eligibility determination and renewal processes for cover additional categories of individuals, including most Medicaid applicants and beneficiaries from one disabled individuals receiving Supplemental Security based on a static, 20th century welfare program model Income (SSI) cash assistance and individuals not to one that utilizes information technology (IT) to receiving AFDC or SSI, but states still have been provide the insurance coverage option that fits each required to follow the AFDC program’s rules for individual’s current circumstances and needs. determining eligibility for parents/caretaker relatives, pregnant women, and children (even after the The effectiveness of this new model will depend upon Temporary Assistance for Needy Families program states’ ability to implement it successfully. replaced AFDC in 1996). Because AFDC income Implementation will require substantial changes to limits were very low, most states provide Medicaid state policy; extensive enhancements, if not only to parents/caretakers with income well below replacements, of state IT systems; the production of 100 percent of the FPL. All states, by law, cover new application and enrollment materials; the pregnant women and children under age 6 with family establishment of new outreach methods; the potential income through 133 percent of the FPL and children reorganization of state eligibility personnel; and ages 6 through 18 with income through 100 percent unprecedented coordination between state of the FPL; most cover individuals in these categories organizations. Drawing on preliminary federal with much higher levels of income (up to 300 percent guidance, most states initiated a planning process in of the FPL). 2010 and 2011. While final federal guidance is now being released, states still face many implementation Medicaid applications for parents/caretaker relatives, issues. pregnant women, and children take two general forms: (1) joint applications for Medicaid, cash State Health Access Reform Evaluation, a national program of the Robert Wood Johnson Foundation® Implementing Eligibility Changes under the Affordable Care Act: Issues Facing State Medicaid and CHIP Programs assistance, the Supplemental Nutrition Assistance programs. States with separate CHIP programs Program (SNAP, formerly known as the Food Stamp coordinate Medicaid and CHIP eligibility program), child care subsidies, energy assistance, and determinations to different degrees. In some separate other state-administered social service programs; and CHIP program states, the Medicaid and CHIP (2) applications only for Medicaid and the Children’s programs share offices, caseworkers, and computer Health Insurance Program (CHIP). All application systems; in others, they operate completely separately. forms contain questions about applicants and family/household members, their demographics, relationships, and sources of earned and unearned ACA ELIGIBILITY PROVISIONS income; some also ask about assets. Joint program applications typically request more information than To provide coordinated guidance on the eligibility Medicaid/CHIP-only forms. determination process for insurance affordability programs and health plan coverage through an Most states accept applications in-person, by mail, or exchange, the Centers for Medicare & Medicaid electronically, although some still require them to be Services (CMS) published the proposed rule submitted in conjunction with face-to-face interviews. “Medicaid Program: Eligibility Changes Under the While application assistors and staff working for Affordable Care Act of 2010” on August 17, 2011, in qualified entities (such as participating providers) may conjunction with the Department of Health and assist with completing and filing applications, merit Human Services’ (HHS) proposed rule on exchange system employees in state or local Medicaid or welfare eligibility determinations and the Internal Revenue agency offices currently must make final eligibility Services’ “Health insurance premium tax credit” determinations. Eligibility caseworkers data enter or proposed rule. After reviewing over 800 formal import application data into a computer system and, comments, as well as feedback obtained from states, either manually or by prompting an automated system: tribes, and other parties, CMS issued a final/interim (1) establish household composition and size, (2) final rule incorporating significant changes on March determine which individual(s) on the application 23, 2012. While the March 23 rule reflects final belong to eligibility categories (e.g., caretaker relative policies, CMS has stated it will issue additional or child), (3) verify income and resources and other regulatory and subregulatory guidance on related non-financial factors of eligibility, such as residency policy and operational issues. and citizenship, (4) calculate gross income (and assets, if relevant), (5) determine net income by subtracting The March rule's intent is to align Medicaid and CHIP deductions and disregards, and (6) compare monthly eligibility determinations for parents/caretaker net income and total countable assets to the state’s relatives, other adults, pregnant women, and children income and resource limits for eligibility groups within with determinations for health plan coverage by the the applicable eligibility categories. Caseworkers exchanges and determinations for advance payments verify financial and non-financial information by of premium tax credits and cost-sharing subsidies by reviewing paper documentation or by querying state the IRS. The rule modifies the Code of Federal databases such as unemployment compensation Regulations to enable an entity to determine eligibility systems, or federal systems like the U.S. Department for all insurance affordability programs using a single of Homeland Security’s Systematic Alien Verification streamlined application, IRS income rules, and a for Entitlements (SAVE) program. They first test shared electronic verification service. The most whether the applicant(s) qualifies for the most significant actions of the March rule as of January 1, beneficial eligibility groups and then “cascade” 2014, are listed in Figure 1. through all possible eligibility groups before making a final determination. By regulation, the entire determination process may take up to 45 days. Once STATE IMPLEMENTATION ISSUES an individual is enrolled in Medicaid, his/her case is reviewed if there is a change of circumstances that While federal guidance was being developed, a might affect eligibility, or after a set period of time not workshop of state Medicaid and CHIP eligibility to exceed 12 months. If the individual was directors and national health care reform and tax simultaneously enrolled in other programs like SNAP, policy experts convened in May 2011 to identify the the state will typically coordinate reviews for all SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 2 Implementing Eligibility Changes under the Affordable Care Act: Issues Facing State Medicaid and CHIP Programs Figure 1. The Most Significant Actions of the March 2012 Rule on Medicaid Eligibility Changes Creates eligibility groups for adults ages 19 through 64 who are not otherwise eligible for Medicaid as a parent/caretaker relative of a dependent child, pregnant woman, disabled individual, or Medicare beneficiary Establishes a minimum eligibility level of 133 percent of the FPL (effectively 138 percent of the FPL when a 5 percent disregard is taking into account) for individuals in these categories Prohibits states from considering assets in determining eligibility for individuals in these categories Requires that states use the IRS’ methodology for determining Modified Adjusted Gross Income (MAGI), with certain exceptions, to determine household composition, family size, and income eligibility, thereby eliminating most income deductions and disregards Provides increased federal financial participation for "newly eligible" adults who would not have been covered under the state's policies and procedures in effect as of December 2009 Mandates that all states use a standard, streamlined application form developed by HHS for all insurance affordability programs, or an approved alternative that is no more burdensome, and accept it via an internet Web site and other electronic means, telephone, mail, and in person. (States may use a multi-benefit program application in addition to the standard application form.) Mandates that states make available Web sites in accessible, plain language with information regarding application for and receipt of Medicaid and other insurance affordability program benefits Requires states to rely to the extent possible upon electronic data, including a shared electronic service (or federal data hub) established by HHS, to verify financial and non-financial information Establishes that Medicaid agencies must accept and transfer via secure electronic interface eligibility information, including eligibility determinations, from other insurance affordability programs Permits entities other than the Medicaid or welfare agency, including nongovernmental exchange entities, to determine 1 eligibility 1 In its May 16, 2012, “General Guidance on Federally-facilitated Exchanges,” CMS states that it will seek further comment regarding ways states can engage non-profits and private contractors while having government agencies still make final eligibility determinations. issues states face in implementing these provisions, the household under Medicaid?” or “Can unmarried particularly the switch to MAGI methodologies. State parents still apply for Medicaid as one family if they participants were clear about their main needs and do not file a joint tax return?” challenges. The state representatives also identified the need for First and foremost, the state directors wanted explicit direction regarding what budget period to use immediate and detailed guidance on several provisions to determine and renew eligibility after 2013, since of the law. Using scenarios, they demonstrated the MAGI is based on annual income and need for specific instructions from CMS on how to AFDC/Medicaid financial eligibility is calculated using compose household and family units when the monthly income. They asked, for example, “In the AFDC/Medicaid and IRS statutes conflict. The event that the latest tax return does not reflect a very scenarios raised questions such as “Should states recent change in employment, should states still use include in the Medicaid household a 19-year-old living the annual income from that return, or calculate at home who is not a dependent of the parents for tax income based on the applicant’s monthly earnings purposes but who would traditionally be included in from a new job?” SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 3 Implementing Eligibility Changes under the Affordable Care Act: Issues Facing State Medicaid and CHIP Programs the federal data services hub to get data from the IRS Workshop participants highlighted the need for a and other federal agencies. States might also have to formula to convert current Medicaid net income develop interfaces with systems used by health standards into equivalent MAGI-based standards. insurance exchanges so that application data can be Specifically, they requested a formula to determine transferred for the purposes of making the how much income an individual applicant or families appropriate eligibility determination. Finally, states of different sizes could have and still be eligible for will have to program their systems to identify the Medicaid when MAGI methodologies replace current newly eligible so they will be able to claim them on procedures for counting net income, which typically expenditure reports to CMS. To do this, they will include disregarding certain types and amounts of need answers from CMS regarding whom to consider earned and unearned income. newly eligible. The state representatives asked questions such as, “Is an adult who is determined States emphasized that they cannot amend their eligible only for the new adult group after January 1, Medicaid state plans (essentially their contracts with 2014, still newly eligible if he later qualifies for one of CMS) to reflect compliance with the ACA until they the disability-related eligibility groups that the state receive guidance on these provisions. They added covered in 2009? that, after receiving approval of their state plan amendments, they would still need to enact According to workshop participants, their systems conforming legislation, develop new regulations, and changes will require considerable resources (including draft other policy documents, a process which could time, funds, personnel, and contracting vehicles). In take more than a year to complete many states, particularly those with legacy systems, it could take over a year to complete programming In addition to policy guidance, state directors wanted activities, including testing. Most states already had the final standard, streamlined application or details long programming queues before the ACA's regarding acceptable alternatives. Without either, enactment because they can only revise computer states cannot finalize and disseminate their own code for one initiative at a time, or because they applications (Medicaid and CHIP programs employ few skilled programmers. To further commonly include state-specific information, like complicate matters, many state Medicaid and CHIP logos and phone numbers, on their forms), train agencies do not own their eligibility systems and must caseworkers to use them, and modify their computer prevail upon the system owners (typically the welfare systems to receive them. In many states, caseworkers agency) to prioritize and make Medicaid-related enter data into eligibility systems in the order it is changes. provided on the application. These states will have to reorder their data entry screens if the standard Lastly, in addition to revising policy and updating their application includes different questions, or if its computer systems, state leaders have to determine questions flow differently. States that do not currently how they will organize and staff the Medicaid and use electronic applications will have to add CHIP eligibility functions after 2014--for example, will functionality to their systems to accept and import they continue to have caseworkers in welfare offices electronic application data by 2014. determine eligibility for social services and health insurance programs, will they co-locate Medicaid States will have to make additional changes to their and/or CHIP eligibility workers with exchanges, or eligibility systems. States will have to reprogram them will they have exchange staff make all Medicaid to add the new adult eligibility groups (if applicable) and/or CHIP eligibility determinations? and to reflect the MAGI income methodologies and Reorganizations will take a significant amount of time standards. This will require coding business rules for to implement because they will have significant determining the Medicaid eligibility of budgetary, personnel, and even political, ramifications. parents/caretakers, non-disabled adults (if applicable), Before they can finalize staffing plans, states need to pregnant women, and children without modifying the learn from CMS exactly who will be able to determine rules for other eligibility groups or programs (like eligibility for the exchanges. SNAP). To meet the requirement to rely upon electronic data to the fullest extent possible to verify eligibility, they will have to connect their systems to SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 4 Implementing Eligibility Changes under the Affordable Care Act: Issues Facing State Medicaid and CHIP Programs STATUS OF ISSUES CONCLUSION Through its regulations, subregulatory guidance, If implemented successfully, the Affordable Care formal presentations, and direct technical assistance, Act's Medicaid eligibility provisions could modernize CMS has addressed many of these implementation and streamline the process by which low-income issues (as well as other implementation issues raised uninsured and underinsured individuals and families by states). For example, CMS provided detailed enroll in Medicaid, CHIP, and other affordable answers to states' specific questions about household insurance coverage options. Implementation requires composition, income methodologies, and budget substantial policy development, information systems periods in the final rule and during a March 29, 2012 updates, and, potentially, organizational changes. It is "Medicaid Eligibility and Enrollment Final Rule" especially difficult at the state level due to the need to public webinar on "MAGI Methods and Household follow federal guidance and resource constraints. Scenarios." CMS has also provided support to states Since the ACA's March 2010 enactment, CMS, other for overhauling or replacing their eligibility systems by federal agencies, state governments, and many other making available enhanced federal funding, stakeholders have engaged in a flurry of establishing conditions and standards for receipt of implementation activities, which have resulted in final that funding, issuing guidance on cost allocation, and guidance and financial and technical support for expediting the review and approval of planning and states; however, many of the implementation issues implementation advanced planning documents. state Medicaid and CHIP eligibility directors have identified remain unresolved. Regular two-way Some issues identified by states at our workshop are communication between CMS and states, including unresolved, although progress has been made in detailed discussion of outstanding issues like that bringing them to resolution. CMS is currently facilitated in a SHARE workshop, will facilitate timely working with contractors and selected states to test implementation. proposed methodologies for converting income standards into MAGI-based standards and for identifying and claiming the newly eligible -- it expects This brief follows a November 2011 presentation to issue final regulations on these issues later in 2012. at the Association for Public Policy Analysis and CMS is also working closely with multiple partners to Management (APPAM) Fall Conference regarding develop paper and electronic versions of the standard state perspectives on implementing expanding application. CMS spelled out its principles for the Medicaid eligibility under the ACA, which is application during an April 19, 2012, public webinar available at on "Application, Verification, and Renewals," but is http://www.shadac.org/publications/MedicaidEli still finalizing the set of questions to be included in gibilityMAGI_state. It is a companion to the brief each version. Regarding the federal shared services titled “Income Eligibility hub, CMS is continuing to consult with its federal for Assistance under the Affordable Care Act: partners and states on its development, but questions Estimates for Nonelderly Adults" and to the brief about data sources, common identifiers, cost titled “Translating Modified Adjusted Gross allocation, and functionality, among others, remain. Income (MAGI) to Current Monthly Income,” Questions also remain about language in the March 23 which can be found at rule allowing Medicaid agencies to delegate eligibility www.shadac.org/share/grant/Eligibility-MAGI. determinations to an exchange (even when private contractors operate it) - states would like clarification about the meaning of the "merit system personnel protection principles" exchange entities must employ. SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 5 Implementing Eligibility Changes under the Affordable Care Act: Issues Facing State Medicaid and CHIP Programs ACKNOWLEDGMENTS The author is grateful to SHARE and the Robert Wood Johnson Foundation, particularly Lynn Blewett, Elizabeth Lukanen, Carrie Au-Yeung, and Andy Hyman, for their support of this work. I would also like to thank the following state Medicaid and CHIP program personnel for their time and contributions: Penny Ellis, Gretel Felton, Karen Gibson, Elena Josephick, Beth Osthimer, Manning Pellanda, Rebecca Mendoza, Cindy Palko, Anita Smith, and Mary Wood. Finally, I appreciate the insights of: January Angeles, Deborah Chollet, John Czajka, Gillian Hunter, Laura Grossman, and Chad Shearer. ABOUT SHARE The State Health Access Reform Evaluation (SHARE) is a Robert Wood Johnson Foundation (RWJF) program that supports rigorous research on health reform issues at a state level, with a focus on state-level implementation of the Affordable Care Act (ACA) and other efforts designed to increase coverage and access. The program operates out of the State Health Access Data Assistance Center (SHADAC), an RWJF-funded research center in the Division of Health Policy and Management, School of Public Health, University of Minnesota. Information is available at www.shadac.org/share. SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 6