Healthcare providers and managed care organizations (MCOs) are beginning to experience the financial impacts of the end of continuous Medicaid enrollment and the reductions associated with the enhanced Federal Medical Assistance Percentage (FMAP) under the Families First Coronavirus Response Act (FFCRA), as well as decreases in the number of Medicaid beneficiaries covered. The expiration of Medicaid's continuous enrollment authorized by FFCRA is the single largest healthcare transition event since the first open enrollment period under the Affordable Care Act (ACA).

Since 2023, states have been working to revert back to their regular state eligibility and enrollment procedures after implementing continuous enrollment. The decrease in coverage under Medicaid and the Children’s Health Insurance Program (CHIP) is causing significant concern for children and adults. This is creating a ripple effect across the healthcare industry, as MCOs experience reduced capitation rates for covering children while more uninsured individuals seek care in the healthcare system.

The final rule on Streamlining the Medicaid, CHIP, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes (Final Rule) aims to simplify and standardize eligibility, enrollment and renewal processes for Medicaid, CHIP and the ACA’s Basic Health Program (BHP). The Centers for Medicare & Medicaid Services (CMS) has established the following four objectives for the Final Rule:

  1. Simplify the application and enrollment processes.
  2. Improve retention rates in the program for Medicaid beneficiaries.
  3. Eliminate barriers to access to care for children.
  4. Strengthen program integrity.

These goals aim to resolve many administrative and procedural issues that contributed to the loss of Medicaid coverage for millions under the unwinding process.

In this rulemaking, CMS finalizes the remaining provisions of a September 2022 proposed two-part rule addressing eligibility and enrollment processes for Medicaid and CHIP. The first rule, finalized in September 2023, addressed provisions of the proposed rule specific to individuals who are dually eligible adults who qualify for both Medicaid and Medicare. The Final Rule, which received over 7,000 comments from the public, state agencies, and healthcare stakeholders, addresses the remaining provisions from the September 2022 proposed rule. CMS developed both rules in response to the White House Executive Orders on Strengthening Medicaid and the Affordable Care Act and Continuing to Strengthen Americans’ Access to Affordable, Quality Health Coverage

The Final Rule became effective on June 3, 2024, and requires compliance with certain provisions on the effective date. For regulatory changes other than the effective date, Table 2 of the Final Rule sets out a phased-in compliance timeline, with some effective dates occurring as far out as June 3, 2027.

Application and enrollment / Renewal and retention

Allowed deduction for prospective medical expenses

The Final Rule permits states to project incurred medical expenses of non-institutionalized individuals who seek to establish eligibility for Medicaid as medically needy. Generally, the medically needy are individuals who have incomes too high to qualify for a categorically needy group of Medicaid eligibility and instead achieve income eligibility by “spending down” uncovered medical and remedial care expenses incurred, such as Medicare premiums. When an individual qualifies as medically needy, coverage can last one to six months. Projecting costs before they incur can expedite eligibility. Additionally, the Final Rule permits projection of “reasonably constant and predictable” services, including certain home and community-based services and prescriptions drugs.   

Required electronic asset verification

The Final Rule clarifies that states must verify assets through available electronic asset verification systems. If the information provided by an individual applicant is reasonably compatible with the asset verification system, the state may not request further verification of assets from that individual.

Verification of citizenship and identity

Under previous rules, CMS required additional proof of identity if a Medicaid applicant’s US citizenship was not verified through the Social Security Administration. Under the Final Rule, CMS will allow verification of birth through a state’s vital statistics records or the US Department of Homeland Security’s Systematic Alien Verification for Entitlements (SAVE) program to serve as proof of citizenship without requiring additional proof of identity.

Requirement to apply for other benefits

Under the Final Rule, states will no longer be allowed to require Medicaid applicants to apply for other benefits as a condition of Medicaid eligibility.

Enrollment and renewal for elderly, blind or disabled applicants

CMS will now require states to streamline the process for Medicaid applicants whose eligibility is based on being 65 or older or having blindness or disability (non-MAGI applicants) to match the enrollment and renewal requirements already in place for applicants eligible based on modified adjusted gross income (MAGI applicants).

For non-MAGI applicants, the Final Rule requires states to:

  1. Conduct renewals no more than once every 12 months with limited exceptions.
  2. Use prepopulated renewal forms.
  3. Provide a minimum 90-day reconsideration period after a procedural termination for failure to return information needed to redetermine eligibility.
  4. Limit requests for information about a change in circumstances to information on the change.
  5. Accept renewals through multiple modalities including online, phone, mail and in-person.
  6. Eliminate in-person interview requirements.

Deadlines for returning information

CMS is now requiring that states provide individuals a minimum of 15 days to return information requested in connection with an initial application and a minimum of 30 days for information requested to retain enrollment. Updated enrollment-related timeframes are provided in Table 1 of the Final Rule.

Using available data and address changes

Under the Final Rule, states must now check available data prior to terminating eligibility when a beneficiary cannot be reached due to returned mail. Additionally, CMS will now require states to have a reasonable process for updating addresses when individuals move within the state.

Children’s coverage

Transition between Medicaid and CHIP coverage

CMS now requires the Medicaid and CHIP programs to accept eligibility determinations from each other according to the Final Rule. This change allows for an easier transition if incomes change and the beneficiary appears eligible for the other program during application or renewal.

Waiting periods, lock-out periods and benefit limits

Eleven states currently require a period of non-coverage from any healthcare plan (waiting period) before applicants may initially enroll in CHIP. The Final Rule now prohibits states from adopting new waiting periods, and states have until June 2025 to remove existing waiting periods. However, CHIP applicants must still not have access to alternative forms of insurance to qualify for CHIP coverage.

Under Medicaid and CHIP rules, states may charge premiums and cost-sharing for beneficiaries. Fourteen states currently employ lock-out periods, which include a period of time preventing CHIP beneficiaries who are behind on CHIP premiums from re-enrolling in the CHIP program. In the Final Rule, CMS prohibits states from enacting lock-out periods. While states may disenroll individuals for unpaid premiums at the end of the 12-month continuous eligibility period, they may not impose a specified period that individuals must wait to re-enroll in CHIP coverage. Additionally, states are no longer permitted to require payment of past-due premiums as a condition of re-enrollment.

Optional CHIP coverage for individuals under 21

CMS clarifies in the Final Rule that states have the option to establish an eligibility group for all or a reasonable classification of individuals under age 21 whose eligibility is excepted from using the MAGI-based methodology (e.g., those living with a disability) or whose MAGI-based eligibility is not otherwise described, and for which such coverage is not already permitted in regulation.

Program integrity

Medicaid and CHIP recordkeeping

Recordkeeping regulations for state Medicaid and CHIP agencies were last updated in 1986. Under the Final Rule, states must store Medicaid and CHIP records electronically, make them available within 30 days upon request, and retain certain records for at least three years to enhance data integrity.

If you have any questions about the Final Rule or the Medicaid and CHIP programs, please do not hesitate to contact us.

Special thanks to Summer Associate Abel Chacko (Houston) for his assistance in the preparation of this content.


Co-Head of Healthcare, United States
Senior Analyst, Health Care

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