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Medicaid redetermination: 3 steps to minimize impacts on health systems

November 6, 2023 Article 4 min read
Kyle Higdon
The unwinding of Medicaid continuous coverage can shift inpatient ratios and put your health system’s reimbursements, Medicare DSH payments, and 340b eligibility at risk. These proactive steps can help minimize the impacts of Medicaid redetermination.
Health professional explaining Medicaid redetermination.With the end of the COVID-19 public health emergency and unwinding of the Medicaid continuous enrollment requirement, Medicaid beneficiaries are once again subject to the annual redetermination process to assess whether they qualify for benefits. It’s estimated that some 15 million beneficiaries could be disenrolled, according to The Commonwealth Fund. Healthcare providers, including managed care organizations, hospitals, and health systems, all face significant impacts. These span population health to administrative and financial, including Medicare Disproportionate Share Hospital (DSH), Medicare Uncompensated Care Pool, and 340b eligibility. A proactive approach is crucial.

Medicaid redetermination timeline

Redetermination began in April and is underway across the country, with states mailing out redetermination packages to beneficiaries based on their renewal date. But it’s been three years since beneficiaries have gone through the process, and those who don’t receive or who don’t promptly return their redetermination package stand to lose their Medicaid benefits even though they may still qualify.

States have 14 months to complete the process (although additional federal funding for Medicaid will wind down by the end of 2023). Providers will need to make the actions below a continuous part of their administrative oversight and financial modeling.

Medicaid redetermination impacts on health systems

As states reevaluate eligibility, a shifting inpatient ratio can put your Medicare DSH reimbursement, Medicare Uncompensated Care Pool distributions, and 340b drug pricing discounts at risk. Hospitals whose ratios far exceed the necessary Medicare DSH and 340b qualifying thresholds face lower Medicare DSH reimbursement due to patients who are no longer Medicaid-eligible. Hospitals whose ratios are close to the Medicare DSH and 340b qualifying thresholds face greater consequences, with the potential to lose eligibility for either program altogether. Many hospitals hover at the threshold, some within as few as 100 Medicaid-eligible inpatient days. It can be a razor-thin margin, and losses in 340b savings or DSH eligibility can reach seven figures, even for small hospitals.

Providers are also likely to see reimbursements fall due to increased charity care, bad debt, and greater pressure on health system resources. Patients who have been dropped but still qualify for Medicaid benefits require greater administrative support to help get benefits restored and to collect proper payments.

Take a proactive approach to Medicaid redetermination

1. Educate patients and members

Educate patients and enrollees about the redetermination process and remind them to watch for, complete, and promptly return their documentation.

  • Notify beneficiaries they will not be auto-enrolled like they have been the past three years and that they must complete the process to keep their benefits if they’re still eligible.
  • Consider using a third-party vendor for patient outreach and reenrollment.
  • Share state resources with patients, such as state-specific dashboards and reenrollment process information. (In Michigan, information can be found through the Department of Insurance and Financial Services’ Medicaid Redetermination page.) 

2. Manage, monitor, and communicate internally throughout the redetermination process

Verify benefits early

Compare patient information against your state’s Medicaid database to ensure your patient financial services (PFS) team has updated, accurate data. (Patients who haven’t come up for redetermination yet could be candidates for a reminder to expect and return their paperwork.)

Coordinate efforts between your reimbursement department and Patient Financial Services

Ensure patient classes reflected in your internal inpatient-level monitoring are consistent with what your health system is actually collecting. Strengthen coordinated efforts between reimbursement and PFS to understand Medicaid redetermination trends. Is there an uptick in patients initially labeled as Medicaid-eligible that once adjudicated are no longer classified as Medicaid? How do disenrollment figures among your patients stack up against your state’s figures? Drill into state data; how many beneficiaries have been disenrolled, and how many of those were for procedural reasons or based on income? Benchmark against state data to assess how you’re tracking.

Hospitals close to the 340b threshold face the most risk. Keep in mind that while your system might show ample year-to-date eligible inpatient days to meet the threshold, the figures may be overstated depending on how the redetermination process is unfolding in your state and among your patient accounts.

In addition to tracking trends with reimbursement and PFS, run reports monthly on inpatient volumes and Medicare DSH calculations, and build in cushioning since you may have fewer eligible days than expected. Look at operations and understand what’s happening in your service lines (such as increases or decreases in physician count) and what impact that will have on your eligible-days ratio.

Validate your data against state figures

Consider seeking an interim Medicaid eligible-days study to validate your inpatient data against your state’s database and to build confidence in the accuracy of your inpatient ratio.

3. Stay updated on the unwinding of continuous coverage

Use an online unwinding tracker or your state Medicaid program website to follow — closely — the status of redetermination. Particularly with respect to Medicare DSH and 340b thresholds, “business as usual” can increase the risk of funding loss. Get ahead in front of the process to avoid increased administrative expenses, decreased reimbursement, and surprises around DSH and 340b eligibility.

Medicaid redetermination success factors

Providers successful at managing the redetermination process are going to be those that are proactively educating patients and subscribers, actively monitoring Medicaid volumes with their PFS and reimbursement departments to identify coverage gaps early, and keeping abreast of continuous coverage unwinding. The process will continue over the next 14 months. Since each state’s Medicaid program operates differently, it’s imperative to monitor what’s happening, educate your patients, and understand the impact on your inpatient ratios.

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