Millions are leaving Medicaid, and that’s a good thing

Recent newspaper headlines have lamented that millions of Americans were “booted” from their Medicaid coverage this summer. As alarming as those headlines sound, they are rather misleading. In truth, there is no reason for panic.

Medicaid helps out-of-work, low-income, and disabled populations pay for health care expenses. The program has legal eligibility requirements designed to prevent abuse, protect taxpayers who fund Medicaid, and ensure that the program remains solvent for those who truly need it.

More Americans are leaving Medicaid right now because a near-record number were temporarily eligible for it during the COVID-19 pandemic, when unemployment spiked to 15 percent, and the federal government prevented states from implementing Medicaid eligibility rules.

Times have changed — and for the better. The unemployment crisis during the COVID years was mercifully short-lived and unemployment is now back to less than four percent. That means that many Medicaid enrollees who became program-eligible have returned to work and often with better jobs, better pay, and better health insurance.

Some experts estimate that there are now nearly 10 million enrollees who are no longer eligible for Medicaid, but they also don’t need it.

As the pandemic emergency subsided, Congress allowed states to resume checking Medicaid eligibility and to remove ineligible enrollees beginning in May 2023 — both standard practices before COVID. Some states acted quickly. Some moved slowly. But sooner or later, all states must ensure the integrity of the program so that limited medical resources go to those truly in need, so that taxpayer money is not given to those who do not qualify for it, and so that states can continue to afford providing rudimentary Medicaid benefits.

States need to conduct prompt, transparent reviews of their Medicaid rolls, not to punish the rightful beneficiaries, but to protect them. The Biden administration has discouraged states from acting quickly, going so far as to pause Medicaid determinations in several states over the summer. Democrats have even tried to dissuade states from disenrolling the ineligible. These efforts are misguided.

States cannot stop eligibility reviews — they have a duty to keep Medicaid solvent for those who need it. A necessary step toward doing this is to remove ineligible enrollees who have gone back to work and now exceed the Medicaid income threshold. Failure to remove ineligible enrollees can cost states $80 billion annually. Unlike Uncle Sam, states cannot simply print more money when it runs out.

Some states have efficient automated tools that can review records, tax returns, and other employment data quickly to better prioritize those enrollees most likely to be ineligible. As The Buckeye Institute has recommended, states should use those tools. Medicaid officials can thoroughly review the eligibility determinations and help ineligible enrollees transition to alternative health care exchanges or employer-provided health insurance plans. Mistakes, disputes, and appeals are all bound to happen, and states must have a fast, transparent process with a central authority designated to deal with them and help prevent expensive, time-consuming lawsuits.

Despite the doomsday headlines and heavy pressure from Democrats in Washington, state policymakers must hold the line and preserve Medicaid for eligible recipients. Temporarily inflated rolls were and should be just that — temporary.

It should be cause for relief, not for panic or palpitations, that the program is reverting toward a normal level of enrollment. More Americans are back to work faster than many expected, making more money than they were before, and eligible for better insurance programs. They no longer need to take from a program that helps the indigent. That’s a good thing for everyone.

Rea. S. Hederman Jr. is vice president of policy at The Buckeye Institute and the author of Medicaid: Why and How States Must Review Eligibility.