Iowa Bill Puts Focus on Medicaid Fraud

Published June 7, 2023

Before the COVID-19 pandemic upended the delivery of health care in America and throughout the world, states were realizing that skyrocketing Medicaid costs threatened to devour all discretionary spending. During the pandemic, Medicaid enrollment ballooned by 23 million people to 95 million as eligibility requirements were relaxed and states were given enhanced payments to load more people onto Medicaid and keep them there.

Now that the COVID-19 emergency is over, states must unwind the Medicaid expansion and transition nonqualifying enrollees back to private health insurance and taxpayer-supported exchanges. The Urban Institute predicts as many as 15 million Americans will “lose” insurance as pandemic-era emergency declarations expire and states can resume disenrolling people who do not qualify. However, the Institute acknowledges that “almost all” are eligible for state supported exchanges, employer sponsored health insurance, or Medicaid itself through redetermination. As COVID-era stimulus dollars dry up, and hospitals scramble to balance their books, those who no longer qualify for Medicaid need to transition to alternative health care insurance options.

To provide care to those who truly need it and keep insurance premiums more affordable to businesses and families who pay for private health insurance, states need to stop paying for people who do not qualify for Medicaid because they make too much money, live in another state, or are dead.

In Iowa, Senate Bill 494 seeks to reform determinations to stop paying for ineligible Medicaid enrollees. Nearly 900,000 Iowans are enrolled in Medicaid. Iowa reports only catching 287 cases of improper payments. That tiny number is the tip of the iceberg, with the vast majority of wasted dollars going to insurance companies to pay for Medicaid policies for people who do not qualify.

In January 2023, more than 93 million Americans were enrolled in Medicaid. According to CMS data, $80.6 billion was improperly spent in 2022, and a staggering $98 billion in Medicaid spending was misspent in 2021. The vast majority of these improper payments (66.4 percent for Medicaid) went to payments deemed improper because of eligibility issues.

Iowa’s Senate Bill 494 attempts to retrieve some of these dollars by updating the state’s eligibility determination process. Beginning in 2026, it is assumed that 8,000 Medicaid enrollees will lose eligibility due to discrepancies.

The bill seeks to partner with a private vendor to help administer sections of the legislation dealing with enrollee outreach. The price of the vendor contract is assumed to be $500,000 plus a 10 percent contingency payment based on total savings.

Eligibility determination involves verifying who someone is and constructing a clear picture of their financial need. For people who have unstable housing, or may not routinely use a bank, this can be so burdensome that states may simply deem it too difficult and focus on other areas of program integrity. SF 494 Section 3 “requires that prior to the HHS awarding public assistance benefits to an applicant, the applicant shall complete, through a variety of available methods, a computerized identity authentication process to confirm the identity of the applicant through knowledge-based questionnaire consisting of financial and personal questions…tailored to assist persons without a bank account or those who have poor access to financial and banking services.”

Using vendors to help locate vulnerable enrollees and manage their health just makes sense. Managed care providers should embrace this concept and work with states to integrate this as part of their charge. States should endeavor to find ways to meaningfully communicate with Medicaid enrollees to help improve their overall care and determine their eligibility for scarce resources. As unemployment increases, so does the size and cost of Medicaid. Troublesome clouds on the economic horizon may give state legislators little choice but to stop paying for the health care of people who don’t qualify for it.

The following documents provide additional information:

Fiscal Impact of Senate IA S 494: Provides a breakdown of the financial impacts of implementing this bill on the state of Iowa

Link to Senate IA S 494:

Most Recent Medicaid Enrollment Data:

National Governors Association: Medicaid and State Budgets This paper outlines the key factors for Governors and state leaders to consider when balancing state budgets and making difficult decisions about funding Medicaid during the COVID-19 crisis.

Louisiana Plans to Spend $196 Million to Check Medicaid Enrollee Status: Gov. John Bel Edwards’ administration has proposed spending $195.8 million to reach out to Medicaid enrollees and check whether they meet the qualifications for the public health insurance program during a massive Medicaid disenrollment over the next year. 

Ineligible Medicaid Enrollees Costing Taxpayers Billions: Hayden Dubois and Jonathan Ingram of FGA detail the scale of improper payments based on enrollment eligibility issues with Medicaid.

Unwinding Continuous Medicaid Provisions (After Emergency COVID provisions): KFF examines options for states as emergency pandemic restrictions on Medicaid are lifted.

Medicaid Expansion: Expensive, Ineffective and Damaging to Existing Healthcare Infrastructure  Linda Gorman, Director of the Independence Institute and Senior Policy Fellow with the Goodman Institute looks at the costs to providers when Medicaid is expanded in the states.

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