Ensuring Continuous Eligibility for Medicaid and CHIP: Coverage and Cost Impacts for Children

Abstract

• Issue: Disruptions in health coverage may delay care for children and create higher administrative costs. To address these disruptions, the Consolidated Appropriations Act of 2022 requires states to give children 12 months of continuous eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) by 2024. Currently, 33 states offer continuous eligibility to at least some children.
• Goal: To estimate how ensuring 12-month and 24-month continuous eligibility for all children in Medicaid and CHIP would affect health care coverage and costs.
• Methods: Simulation of changes in health coverage and government spending impact, using the Urban Institute’s Health Insurance Policy Simulation Model.
• Key Findings and Conclusions: When all states adopt 12-month continuous eligibility in 2024, Medicaid and CHIP enrollment in states that do not already have it will increase by 239,000 children in an average month, an increase of 0.6 percent. Families will spend an estimated $292 million less on health care, an average of $1,222 less per year for each child newly enrolled in Medicaid and CHIP. Federal spending will increase by $458 million annually, and state spending will increase by $238 million annually, both only 0.1 percent increases in government spending on acute care for the nonelderly. Adopting continuous eligibility for 24 months would further expand child health coverage and reduce costs for families.

Introduction

Starting in 2024, the Consolidated Appropriations Act of 2022 requires states to provide children up to age 18 with 12 months of continuous eligibility for Medicaid and Children’s Health Insurance Program (CHIP) coverage. Continuity of coverage is particularly important for children enrolled in Medicaid and CHIP who benefit from regular well-child visits. Disruptions in health coverage may lead to delayed care and higher costs for Medicaid and CHIP.¹

States already had the option of extending 12-month continuous eligibility to children through Medicaid or CHIP, but not all states adopted it. At the time of writing, 24 states had 12-month continuous eligibility for all children’s coverage, and nine more had 12-month continuous eligibility for some children’s coverage, often for CHIP but not Medicaid.² Some states are interested in extending continuous eligibility even further, for 24 months. In 2022, the Centers for Medicare and Medicaid Services approved a waiver in Oregon that would give children continuous eligibility up to age 6 and 24-month continuous eligibility for older children.

In this brief, we use the Urban Institute’s Health Insurance Policy Simulation Model to estimate the impact of all states adopting 12-month and 24-month continuous eligibility for Medicaid and CHIP for children. (For more detail, see “How We Conducted This Study.”) We consider the impact of similar policies for adults in a companion issue brief.³

Our estimates do not include the temporary impact of the unwinding of the federal COVID-19 public health emergency, which will affect health coverage for the first half of 2024.⁴

Key Findings

Impact on coverage with 12-month continuous eligibility for children. When the remaining states adopt 12-month continuous eligibility for children with Medicaid and CHIP, we estimate that 239,000 more children will be enrolled in an average month of 2024, an increase of 0.6 percent (Appendix 1). This expansion in coverage occurs in states that have not already adopted continuous eligibility or which do not offer it to all children. We estimate that Medicaid and CHIP will cover about 47 percent of children in 2024.

With this increase in coverage, 34,000 fewer children will be uninsured in an average month, a decrease of 1.3 percent (Exhibit 1 and Appendix 1).

The reduction in the number of children ever uninsured during the year 2024 will be higher, because, like adults, many children are uninsured for only part of the year. There will be 187,000 fewer children with employer-sponsored insurance, and 17,000 fewer children with nongroup or non-ACA-compliant coverage.

Impact on coverage with 24-month continuous eligibility for children. With 24-month continuous eligibility for children in all states, we estimate 750,000 more children would be enrolled in Medicaid or CHIP during an average month of 2024. Enrollment would increase in all states, including those that already have 12-month continuous eligibility. There would be 79,000 fewer children lacking insurance in an average month, a 3.0 percent decrease.

In Appendix 2, we estimate nonelderly Medicaid and CHIP enrollment in each state with universal 12-month and 24-month continuous eligibility.

Impact on spending and savings with 12-month continuous eligibility for children. With 12-month continuous eligibility for children in all states, federal Medicaid and CHIP spending will increase by $524 million in 2024 (Appendix 3). Spending on Medicaid and CHIP administrative costs will be $46 million lower because the state incurs a cost for each time a person is disenrolled and reenrolled (Appendix 1). The federal government will also save $13 million on uncompensated care for uninsured children, mainly through reduced Medicare Disproportionate Share Hospital (DSH) payments. In all, the federal government will spend $458 million more in 2024, a 0.1 percent increase in total spending on acute care for the nonelderly.

State and local governments will spend $273 million more on Medicaid and CHIP with mandatory 12-month continuous eligibility (Exhibit 2 and Appendix 3).

States will realize administrative savings of $27 million. State and local governments will save $8 million on uncompensated care. In all, state and local governments will spend $238 million more in 2024, a 0.1 percent increase in total health care spending on the nonelderly.

Households will spend $292 million less for children’s health care in 2024. Families will spend an average of $1,222 less on health care for each child newly enrolled in Medicaid and CHIP.

Impact on spending and savings with 24-month continuous eligibility for children. With 24-month continuous eligibility in all states, we estimate that net federal spending on health care would increase by $1.0 billion and state spending would increase by $491 million, both increases of 0.2 percent (Exhibit 3). Households would save $943 million in premiums and other out-of-pocket health care costs (Exhibit 4).

Discussion

At the start of the COVID-19 pandemic, 24 states provided 12-month continuous eligibility to all children enrolled in Medicaid and CHIP, while nine others had limited continuous eligibility. Their aim was to reduce the number of children who are enrolled in Medicaid or CHIP for less than 12 months, many of whom reenroll within a year.⁵ Although some leave the program after less than a year because they have other health insurance (such as coverage offered through a parent’s new employer), others become uninsured.

The Families First Coronavirus Response Act of 2020 barred states from disenrolling Medicaid and CHIP beneficiaries during the COVID-19 public health emergency, leading to record high Medicaid enrollment and record low numbers of uninsured people.⁶ The law’s continuous coverage requirement is stronger than continuous eligibility, but it has made continuity of coverage a more visible policy issue. This experience was likely part of the motivation for Congress making 12-month continuous eligibility for children mandatory in the Consolidated Appropriations Act of 2022.

Several states are pursuing waivers to extend continuous eligibility for children beyond the 12 months that will be mandatory beginning in 2024. In 2022, the Centers for Medicare and Medicaid Services approved an Oregon waiver extending 24-month continuous eligibility to all Medicaid enrollees, with continuous eligibility up to age 6 for young children. Washington, California, and New Mexico are all considering waivers extending multiyear continuous eligibility for children up to age 5 or 6.

There are several important limitations in these estimates. First, the Medicaid and CHIP Payment and Access Commission (MACPAC) highlights differences in continuity of enrollment between states, but only gives a few examples at the extremes.⁷ We do not have data to support simulating state-specific differences.

Second, we do not simulate health coverage in each individual month. The number of children uninsured at any point during 2024 will be higher than the average monthly number of children lacking health insurance because many children are uninsured for only part of the year.

Third, our estimates do not reflect permanent changes that states could make to their eligibility systems to enhance continuity of coverage after the public health emergency unwinds. These changes could increase enrollment both in the baseline and with continuous eligibility.

Other potential changes underway in some states include extending postpartum Medicaid coverage beyond 60 days⁸ and greater use of ex parte (automated) renewals. At the time of writing, comprehensive public information on these plans was lacking.

Conclusion

We find that requiring all states to give 12-month continuous Medicaid and CHIP eligibility to children would improve continuity of coverage, with only modest increases in government spending. This is particularly important because nearly half of all children in the United States are enrolled in these programs.

About 239,000 more children would be enrolled in Medicaid and CHIP in an average month of 2024 for an increase of only 0.1 percent in federal and state government spending on health care for the nonelderly. The number of uninsured children would decline by 34,000 in an average month, though the reduction in the number of children experiencing any break in health coverage during the year would be higher. Families would spend an average of $1,222 less on health care for each child newly enrolled in Medicaid and CHIP.

Extending continuous eligibility to 24 months would increase enrollment by 750,000, including increases in states that already have 12-month continuous eligibility. There would be 79,000 fewer uninsured children in an average month, a decrease of 3.0 percent.