State losing millions over delay in checking Medicaid applications, audit says

OLYMPIA – Washington could save $13 million over the next two years if it hires more people to check applications for Medicaid that increased dramatically under Obamacare, says a new audit report. The extra employees would mean people who don’t qualify would be moved off subsidized care faster.

A state auditor’s report issued Tuesday said the Health Care Authority had a backlog of 112,000 cases that needed verifying as of this summer. That meant the agency needed an average of 120 days to verify whether people who applied for Medicaid were qualified under the Affordable Care Act, sometimes known as Obamacare.

Until those checks are complete, applicants receive subsidized health care. If the investigation shows they aren’t eligible, federal rules say the state isn’t reimbursed for the subsidies they received.

The agency should ask the Legislature for money to hire more employees, work with the union to establish performance benchmarks and set priorities for reducing the backlog, auditors said.

The backlog began in 2014, when the state expanded eligibility for Medicaid under the ACA. The agency increased staff to handle a predicted increase of about 237,000 adults; it actually had 511,000 new applications, but did not increase staff to handle the higher volume.

Most states don’t enroll people in Medicaid until their income is verified. Under federal law, those states must complete that check and enroll eligible applicants within 45 days.

The problem with that system, the audit noted, is applicants don’t have insurance until verification is complete.

Washington is one of eight states that enrolls applicants immediately and then checks income, with no time limit on completing those checks.

Applicants who have income above the guidelines are taken off Medicaid are advised to sign up for insurance on the Health Benefits Exchange. Among applicants, 70 percent are approved automatically and 13 percent are denied automatically. The remaining 17 percent must be verified manually when the incomes they list don’t correspond to figures from the Internal Revenue Service or the state Employment Security Department.

Last year, the agency was processing about 15,000 applications a month, but was receiving 25,600 applications a month. After some improvements in its processing through Lean management this year, it was processing about 2,000 more applications a month than it was receiving. But it still has a four-year backlog to work through.

Hiring 30 more workers would mean that backlog would be cleared in mid 2019, rather than the end of 2021, auditors said. Because the state pays for part of Medicaid, that would save Washington taxpayers about $13 million by moving ineligible people off more quickly.

“Uncertainty about the ACA’s future may make the audit’s recommended cost-avoidance measures even more important,” auditors said. If Congress repeals or reduces Medicaid expansion allowed under Obamacare, the state faces significant costs if it decides to continue expanded coverage at its own expense.

In an email, Gov. Jay Inslee’s office said the Health Care Authority “has made good progress in reducing the backlog” but more work is needed to make sure only those who qualify receive benefits. It is working with the Office of Financial Management to review ways to get through the backlog.