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States Should Start Planning Now for Adapting Their Medicaid Programs Post-COVID-19

  • Health Policy News Team, Peter Cheesman and Lisa Kaplan Howe

    • Business objects on background of engineers discussing blueprint at meeting

    By Peter Cheesman and Lisa Kaplan Howe

    Update: For more information about considerations for states regarding redeterminations of Medicaid following the end public health emergency, click here.

    While the COVID-19 public health emergency (PHE) is expected to last through 2021, the Centers for Medicare and Medicaid Services (CMS) released a State Health Official Letter (SHO Letter) in December encouraging states to start planning now for the changes and activities they will need to implement as the PHE ends. The SHO Letter provides guidance to states on planning for a return to regular operations of Medicaid, Children’s Health Insurance Program (CHIP), and Basic Health Plan (BHP) following the end of the PHE.

    COVID-19 Flexibility and Medicaid Funding / Maintenance of Effort

    Background

    CMS notes in the Letter that it has provided funding, as well as a number of flexibilities, to help states respond to the impact of COVID-19—related to issues including eligibility and enrollment, benefits, and program administration. Some flexibilities were provided uniformly across all states, while others were in response to state actions (such as waiver requests and State Plan Amendments [SPAs], for example). Health Policy News has been tracking these flexibilities since the start of the public health emergency. As outlined in the letter, these flexibilities will eventually expire (in many cases, triggered by the end of the PHE), requiring states to adapt their programs accordingly or seek longer-term flexibility through new SPAs or waivers. The SHO Letter provides guidelines for states seeking extended flexibilities, specifically noting telehealth as an area that may be of interest, as well as the required timeframes and operational activities for ending temporary flexibilities.

    The SHO Letter also addresses the “maintenance of effort” (MOE) and other requirements by which states have abided to qualify for the temporary increase in federal matching funding for the Medicaid program under the Families First Coronavirus Response Act (FFCRA). To qualify for this funding increase, states have to:

    These requirements—which do not apply to separate CHIPs or to the BHP—will also begin to phase out following the end of the PHE. At that time, states will have to update their processes and, in some cases, perform outreach to beneficiaries for information and to provide notice of changes. Both the phase-out timelines and the mandatory operational activities are outlined in the SHO Letter.

    CMS Guidance

    The SHO Letter encourages states to inventory the flexibilities they are currently leveraging to address the PHE, and determine the end dates of those flexibilities, as soon as possible. In doing so, states should consider whether they can end reliance on any of the flexibilities sooner than they expire and whether they should seek to extend the authority for any beyond the end of the PHE. States should also be mindful that some of the temporary flexibilities they may have used to effectuate the MOE requirements (such as Disaster Relief SPAs to cover COVID-19 testing and treatment) expire sooner than the MOE requirements themselves. As a result, states relying on those flexibilities must begin planning not only how to adapt their programs when the MOE requirements end, but also 1) determine the guidelines to which they must adhere during the transition and 2) what actions may be necessary to ensure they remain in compliance with their state plan, the MOE, and related requirements. While planning, states should think broadly about a range of activities that will be required to resume normal operations, including:

    Beyond planning, CMS encourages states to begin processing renewals and redeterminations now, even though—while the MOE is in place—they cannot effectuate terminations. Acting now will enable states to avoid a backlog in processing redeterminations and terminations, and the SHO Letter outlines how states should handle reprocessing redeterminations as the PHE is ending. States must also prepare to ensure individuals they terminate are able to transition smoothly to other coverage.

    In response to repeated renewals of the federal PHE declaration, many states simply extended their Medicaid population’s eligibility for an additional twelve months—presumably deferring any verification activities for another year. The SHO, however, challenged this interpretation of what is required of states when addressing their backlogs following the conclusion of the PHE, noting the following:

    Eligibility and Enrollment Flexibility

    Background

    An area that has gotten less attention than the MOE is the flexibility CMS granted states regarding the federal timeliness standards for processing Medicaid, CHIP, and BHP applications and redeterminations. CMS provided this flexibility with the understanding that states are facing workflow challenges due to social distancing, illnesses, and quarantines, while simultaneously seeing an increase in applications due to the economic crisis. The flexibility spans the duration of the PHE. Once the PHE ends, states have up to four months to resolve any pending applications (the SHO Letter outlines month-specific milestones that states are expected to meet during that four-month period), and up to six months to resolve any verifications, changes in circumstances, and renewals.

    CMS Guidance

    As with renewals, the SHO Letter urges states to begin processing applications and redeterminations in compliance with the timeliness standards as soon as possible. The regulatory provisions that exempt states from meeting federal application and redetermination-related timeliness standards apply to states unable to meet the timeliness standards due to the emergency situation (e.g., due to workforce shortages, increased workloads and other PHE-related operational disruptions). However, CMS notes that this flexibility “does not alleviate states of the obligation to process applications and redeterminations if the state is not prevented from doing so by the circumstances of the emergency.” In particular, states are expected to prioritize enrollment of those with ongoing healthcare needs during the PHE.

    More broadly, the Letter advises that states be prepared to “expeditiously” address the backlog of cases for eligibility, renewals, and redeterminations that will inevitably result from the current flexibility using a risk-based approach outlined in the letter. States will be required to submit data demonstrating their progress, and those that cannot meet stipulated timelines will be at “increased audit risk and corrective action.” To ensure manageable workloads going forward, CMS offers to provide technical assistance to states seeking to ensure renewals are distributed evenly over the year.

    In complying with the requirements outlined above, CMS expects that states will:

    State Considerations and Funding Opportunities

    As states approach their growing eligibility backlogs in particular, the SHO Letter offers a number of best practices for restoring operations and meeting the timelines outlined in the graphic above. These include:

    More generally, states should carefully consider whether they can begin complying with typical processing timeliness standards during the PHE. Throughout the SHO Letter, CMS stresses its expectation that states begin working through their backlog and coming into compliance with typical timelines as soon as they are able. Particularly during the pandemic, providing individuals with coverage as expeditiously as possible is critical to supporting public health. Further, the larger their backlogs grow, the harder it will be for states to process them—while simultaneously processing new cases—within the required timeline following the end of the PHE. If states end up in a position where they cannot process the backlog and new applications as required, they will face scrutiny from CMS.

    States should also consider whether they would benefit from extending existing flexibilities via SPAs or waivers.

    Importantly, in addition to that option, states may have access to funding that would help them improve their technology and/or increase their capacity to address the increased cases and backlog. These potential funding sources include:

    Given the PHE, states have the opportunity to request IT federal match funding on an expedited basis according to the process outlined in 45 C.F.R. §95.624 and the SHO Letter. This funding would allow states to set up or enhance automated data processing (ADP) systems, including Medicaid mechanized claims processing and information retrieval systems, which are defined as including Medicaid eligibility and enrollment systems. The funding could be used on equipment to support the ADP for eligibility and enrollment via a remote workforce, or to support states’ plans to address the eligibility backlog. The funding itself would not be tied to the duration of the PHE.

    Because of the emergency situation, CMS will act on state IT funding requests within 14 days. States will have 90 days after that time to submit a formal request for approval through the typical process for approval of APD expenditures. A 90/10 federal match rate is available for the “design, development, installation or enhancement” of such systems, and a 75/25 federal match rate is available for the operation of such systems.

    States should also consider if they can use the funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act Coronavirus Relief Fund (CRF) for these efforts. CRF funds can be used for a number of purposes, including for “[a]ny other COVID–19-related expenses reasonably necessary to the function of government that satisfy the Fund’s eligibility criteria,” which are:

    Recipients may not use payments from the CRF to cover expenditures for which they will receive reimbursement (i.e., the funds cannot be used for an expenditure’s state match).A more detailed analysis of each of those criteria can be found in Treasury guidance.

    According to CRF guidance, the funds can be employed for a “broad range of uses,” though it cannot be used for revenue replacement. The guidance also outlines requirements for when funds can be used to cover payroll or benefits for employees.

    To date, states have accessed funding for similar needs, such as a State-based Exchange special open enrollment period, enrollment support (which is also specifically provided for the in guidance FAQ), and general government operations. There is no match requirement for the CARES funding, and states do not need prior approval of use of the funding.

    However, states should be mindful of the expectation that the PHE will extend through 2021, and that expenditures to be funded must be incurred by December 31, 2021. As a result, while these funds could be used now to begin addressing the COVID-19 backlog and coming into compliance with general timeliness standards, they likely will not be available after the end of the PHE to come into compliance at that time. Similarly, while taking action now to more quickly process a larger caseload and enroll people during the PHE arguably constitutes a response to a “second-order effect” of the PHE, clearing a backlog after the fact may not meet that criterion.

    States interested in exploring these transition issues generally are welcome to contact Lisa Kaplan Howe (lkaplanhowe@pcgus.com) and Peter Cheeseman (pcheesman@pcgus.com).

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