MEDICAID AND 

INSURANCE 

EXCHANGES 

Additional Federal 

Controls Needed to 

Minimize Potential for 

Gaps and Duplication 

in Coverage

Report to Congressional Requesters

October 2015

GAO-16-73

United States Government Accountability Office
Highlights of GAO-16-73, a report to 

congressional requesters

October 2015

MEDICAID AND INSURANCE EXCHANGES

Additional Federal Controls Needed to Minimize 

Potential for Gaps and Duplication in Coverage

Why GAO Did This Study

Due to changes in income and other 

factors, it is likely that under PPACA 

many low-income individuals will 

transition between Medicaid and 

subsidized exchange coverage. 

Federal regulations require that state 

Medicaid agencies and exchanges 

coordinate to facilitate these 

transitions, including transferring 

individuals’ accounts to the appropriate 

form of coverage when eligibility 

changes occur. However, given the 

complexity of coordinating policies and 

procedures for both coverage types, 

challenges could arise during the 

transition process resulting in 

individuals experiencing coverage 

gaps or duplicate coverage. GAO was 

asked to review information related to 

transitions between Medicaid and 

exchange coverage.

In this report, among other objectives, 

GAO examines the extent to which the 

federal government had policies and 

procedures that minimize the potential 

for coverage gaps and duplicate 

coverage. GAO reviewed relevant 

federal regulations, guidance, FFE 

documentation, and federal internal 

controls standards, and interviewed 

CMS officials. GAO also collected 

information from eight states selected, 

among other factors, to include four 

FFE states.

What GAO Recommends

GAO recommends that CMS take 

three actions, including routinely 

monitoring the timeliness of account 

transfers from states, establishing a 

schedule for regular checks for 

duplicate coverage, and developing a 

plan to monitor the effectiveness of the 

checks. HHS concurred with GAO’s 

recommendations.

What GAO Found

CMS’s policies and procedures do not sufficiently minimize the potential for 

coverage gaps and duplicate coverage in federal exchange states. GAO found 

that individuals transitioning from Medicaid to exchange coverage—that is, 

private health insurance purchased through the exchanges created under the 

Patient Protection and Affordable Care Act (PPACA)—may experience coverage 

gaps, for example, if they lose Medicaid eligibility toward the end of a month. 

Individuals who experience coverage gaps may decide to forgo necessary care. 

In addition, GAO found that some individuals had duplicate coverage, that is, 

were enrolled in Medicaid while also receiving federal subsidies for exchange 

coverage. While some amount of duplicate coverage may be expected during the 

transition from exchange to Medicaid coverage and is permissible under federal 

law, GAO found that duplicate coverage was also occurring under other 

scenarios. Individuals may be held liable for repaying certain exchange subsidies 

received during the period of duplicate coverage. Further, the federal government 

could be paying twice, subsidizing exchange coverage and reimbursing states for 

Medicaid spending for those enrolled in both. 

While the Centers for Medicare & Medicaid Services (CMS), the agency within 

the Department of Health and Human Services (HHS) that operates a federally 

facilitated exchange (FFE) in 34 states, has implemented policies and 

procedures that help minimize the potential for coverage gaps and duplicate 

coverage, GAO identified weaknesses in CMS’s controls for FFE states based on 

federal internal control standards. Specifically:

• GAO found that CMS’s controls do not provide reasonable assurance that

accounts—that is, records—for individuals transitioning from Medicaid to

exchange coverage in FFE states are transferred in near real time. CMS

regulations require that such transfers occur promptly to facilitate eligibility

determinations and enrollment. However, as of July 2015, CMS was not

monitoring the timeliness of transfers. CMS officials told GAO that transfers

are not happening in real time, but their understanding was that states

typically send transfers at least daily. Officials from three of the four selected

FFE states reported that account transfers were occurring at least daily;

officials from the remaining state reported that transfers were sent to CMS

three times per week. To the extent transfers are not happening in a timely

fashion, individuals may be more likely to have gaps in coverage.

• GAO found weaknesses in CMS’s controls for preventing, detecting, and

resolving duplicate coverage in FFE states. For example, as of July 2015,

CMS did not have procedures to detect cases of duplicate coverage.

According to CMS officials, CMS planned to implement periodic checks for

duplicate coverage beginning later that month. However, CMS had not yet

determined the frequency of the checks, a key to their effectiveness. In

addition, CMS had no specific plan for monitoring the effectiveness of the

checks and other planned procedures, making it difficult for the agency to

provide reasonable assurance that its procedures are sufficient or whether

additional steps are needed to protect the federal government and individuals

from duplicative and unnecessary expenditures.

View GAO-16-73. For more information,

contact Carolyn L. Yocom at (202) 512-7114 

or yocomc@gao.gov or John E. Dicken at 

(202) 512-7114 or dickenj@gao.gov. 

United States Government Accountability Office
Letter 1

Background 6

CMS’s Policies and Procedures Do Not Sufficiently Minimize the 

Potential for Coverage Gaps and Duplicate Coverage in 

Federal Exchange States 14

Limited Data Show Small Percentages of Enrollees Transitioned 

between Coverage Types, but Transitions May Increase in the 

Future 30

At Least One Issuer Offered Both Coverage Types in Most States, 

but Many Individuals Transitioning May Not Stay with Their 

Issuer 33

Conclusions 38

Recommendations for Executive Action 39

Agency Comments 39

Appendix I Information on States Selected for Our Review 41

Appendix II Comments from the Department of Health and Human Services 42

Appendix III GAO Contacts and Staff Acknowledgments 46

Tables

Table 1: Number of Individuals Transitioning between Medicaid 

and Exchange Coverage, Selected States, 2014 31

Table 2: Issuer Participation and Share of Exchange and Medicaid 

Enrollment in Selected States in 2014 34

Figures

Figure 1: State Exchange Type and Medicaid Expansion Status as 

of March 2015 8

Figure 2: Illustration of the Transition from Medicaid to Exchange 

Coverage in a Federally Facilitated Exchange State Via 

the Account Transfer Process 23

Contents

Page i GAO-16-73 Medicaid and Exchanges
Figure 3: Potential Length of Duplicate Coverage for Individuals 

with Subsidized Exchange Coverage Who Become 

Enrolled in Medicaid in FFE States, under Different CMS 

Policy Options 28

Abbreviations

APTC advance premium tax credit

CHIP State Children’s Health Insurance Program

CMS Centers for Medicare & Medicaid Services

FFE federally facilitated exchange

FPL federal poverty level

HHS Department of Health and Human Services

IRS Internal Revenue Service

IT information technology

PPACA Patient Protection and Affordable Care Act

SBE state-based exchange

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

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Page ii GAO-16-73 Medicaid and Exchanges
441 G St. N.W.

Washington, DC 20548

October 9, 2015

The Honorable Orrin G. Hatch

Chairman

Committee on Finance

United States Senate

The Honorable Fred Upton

Chairman

Committee on Energy and Commerce

House of Representatives

Starting in 2014, the Patient Protection and Affordable Care Act (PPACA) 

provided many low-income Americans new options for obtaining health 

insurance coverage.1 Specifically, under PPACA, states may opt to 

expand eligibility for Medicaid—the joint federal-state program that 

finances health insurance coverage for certain categories of low-income 

individuals—to individuals who are not eligible for Medicare and whose 

incomes are at or below 133 percent of the federal poverty level (FPL).2

Additionally, PPACA required the establishment in all states of health 

insurance exchanges—marketplaces where eligible individuals may 

compare and select among private health plans—by January 1, 2014.3

States may elect to establish and operate an exchange, known as a 

state-based exchange (SBE), or allow the Centers for Medicare & 

Medicaid Services (CMS)—the agency within the Department of Health 

and Human Services (HHS) responsible for overseeing Medicaid and the 

1

Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and 

Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 Stat. 1029 

(2010). For the purposes of this report, references to PPACA include the amendments 

made by HCERA.

2

PPACA also provides for a 5 percent disregard when calculating income for determining 

Medicaid eligibility, which effectively increases this income level to 138 percent of the FPL. 

The federal poverty level for a family of four in the 48 contiguous states and the District of 

Columbia in 2015 was $24,250; 138 percent of this amount would be $33,465. For the 

purposes of this report, we consider the District of Columbia a state. 

3

CMS commonly refers to the exchanges as marketplaces. Where we discuss exchanges 

in this report, we are referring only to the individual exchanges, rather than the small 

business exchanges also required under PPACA. We refer to health plans purchased 

through the exchanges as exchange coverage.

Letter

Page 1 GAO-16-73 Medicaid and Exchanges

 
exchanges—to do so within the state, known as a federally facilitated 

exchange (FFE).4 In addition, PPACA provides for federal subsidies to 

assist qualifying low-income individuals in affording exchange coverage, 

referred to as subsidized exchange coverage. For example, individuals 

may be eligible for premium tax credits if their incomes fall between 100 

and 400 percent of the FPL, and they do not have access to minimum 

essential coverage through government-sponsored programs, such as 

Medicaid, or private insurance plans, such as employer-sponsored health 

insurance.5

Changes in income and other factors can change an individual’s eligibility 

for Medicaid and for subsidized exchange coverage and, as many lowincome individuals experience income volatility, transitions between the 

two coverage types are likely under the law. Transitions may be more 

likely to occur in the 29 states that as of March 2015 had expanded 

Medicaid as allowed under PPACA, because in these states there is no 

gap in eligibility between the coverage types. In states that have not 

chosen to expand, there is generally a gap in eligibility between the two 

coverage types for adults with incomes under 100 percent of the FPL.6

Previous research has estimated that 6.9 million, or 7 percent, of 

individuals who receive either Medicaid or exchange subsidies will 

experience a change in eligibility from one to the other each year.7

4

In this report, we also refer to federally facilitated exchanges as federal exchanges, and 

states with federally facilitated exchanges as FFE states.

5

In addition to the premium tax credit, exchange subsidies may also include cost-sharing 

reductions for eligible individuals between 100 and 250 percent of the FPL. Eligibility for 

premium tax credits and cost-sharing reductions is limited to U.S. citizens and legal 

immigrants. Individuals may also purchase exchange coverage at the full market price—

that is, without subsidies—and we refer to such coverage as unsubsidized exchange 

coverage.

References to Medicaid coverage in this report do not include Medicaid plans that provide 

less than full benefits such as Medicaid plans that cover only family planning. This is 

because such plans do not constitute minimum essential coverage and do not preclude 

individuals from being eligible for subsidized exchange coverage.

6

Nonelderly adults with household incomes less than 100 percent of the FPL are not 

eligible for subsidized exchange coverage under PPACA and, if their state chose not to 

expand Medicaid to such individuals, they may not be eligible for Medicaid.

7

See M.Buettgens, A.Nichols, and S. Dorn. Churning Under the ACA and State Policy 

Options for Mitigation, (Washington, D.C.: Urban Institute and Robert Wood Johnson 

Foundation, June 2012). This study also notes that some of these individuals may choose 

not to enroll in the coverage for which they become eligible and instead become 

uninsured.

Page 2 GAO-16-73 Medicaid and Exchanges

 
Questions have been raised about whether individuals transitioning 

between Medicaid and exchange coverage could experience disruptions 

in care if, for example, individuals are not able to continue seeing their 

providers. In states with Medicaid managed care programs, where issuers 

of health insurance coverage administer Medicaid benefits, individuals 

may be able to remain with the same issuer when moving between 

coverage types to the extent that issuers offer both types of coverage.8

Some stakeholders have suggested that remaining with the same issuer 

could diminish the likelihood of disruptions in care.

PPACA required the establishment of a coordinated eligibility and 

enrollment process for Medicaid and exchange coverage that ensures 

that individuals are enrolled in the coverage for which they are eligible 

and transferred to the appropriate form of coverage if their eligibility 

changes. This may require significant coordination between various 

information technology (IT) systems within states, as well as between 

federal and state IT systems. Given the complexity of designing 

coordinated policies and systems, challenges could arise during the 

transition process, including that individuals may experience gaps in 

coverage or become simultaneously enrolled in both Medicaid and 

subsidized exchange coverage (referred to as duplicate coverage), which 

is generally not permitted under federal law.9

You asked that we examine information related to individuals’ transitions 

between Medicaid and exchange coverage. In this report, we examine 

(1) the extent to which the federal government and states had policies 

and procedures that minimize the potential for coverage gaps and 

duplicate coverage when individuals transition between Medicaid and 

exchange coverage; (2) the extent to which individuals are transitioning 

between Medicaid and exchange coverage; and (3) the participation of 

issuers in both Medicaid and exchange coverage in a state.

8

States may have different types of managed care arrangements in Medicaid. In this 

report where we use the term managed care, we are referring to comprehensive, riskbased managed care, the most common type of managed care arrangement.

An issuer is an insurance company, insurance service, or insurance organization that is 

required to be licensed to engage in the business of insurance in a state.

9

Individuals enrolled in subsidized exchange coverage who are found to be eligible 

for Medicaid are permitted to be enrolled in both types of coverage through the end of 

the month of the eligibility determination. See 26 U.S.C. § 36B(c)(2)(A)-(B); 26 C.F.R.

§ 1.36B-2(c)(iv).

Page 3 GAO-16-73 Medicaid and Exchanges

 
To examine the extent to which the federal government and states had 

policies and procedures that minimize the potential for coverage gaps and 

duplicate coverage when individuals transition between Medicaid and 

exchange coverage, we reviewed relevant PPACA provisions as well as 

federal regulations and guidance for Medicaid programs and for the 

exchanges. This included reviewing regulations related to coordination 

between Medicaid and the exchanges, eligibility redeterminations and 

termination of both Medicaid and exchange coverage, and technical 

guidance on Medicaid and exchange IT systems. We also reviewed 

relevant documentation of procedures for FFE states and interviewed 

CMS officials to determine whether the agency’s policies and procedures 

for FFE states include internal controls that are consistent with standards 

for internal control in the federal government.10 In addition, we collected 

information from and interviewed Medicaid and, in states with SBEs, 

exchange officials about state policies and procedures in eight selected 

states. We selected states to include four with SBEs—Colorado, 

Kentucky, New York, and Washington—and four with FFEs—Arizona, 

Iowa, Texas, and Utah—and to include states that expanded as well as 

states that did not expand their Medicaid programs. The eight states we 

selected accounted for at least 20 percent of Medicaid and exchange 

coverage enrollment nationwide (see appendix I for more information on 

our selected states). To supplement information from CMS and selected 

states, we interviewed representatives of five issuers, selected because 

they offered both Medicaid and exchange coverage in one or more of our 

selected states, as well as a trade association that represents issuers that 

offered both Medicaid and exchange coverage in multiple states 

throughout the country, and we reviewed related documentation.11 In 

addition, as the Internal Revenue Service (IRS) is responsible for 

reconciliation of advance payments of the premium tax credit, we 

10See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). Internal control is 

synonymous with management control and comprises the plans, methods, and 

procedures used to meet missions, goals, and objectives.

11The five issuers from which we interviewed representatives were Centene Corporation, 

Humana, Molina Healthcare, UnitedHealthcare, and The University of Arizona Health 

Plans. The trade association from which we interviewed representatives was the Blue 

Cross Blue Shield Association. We refer to this association as an issuer for reporting 

purposes.

Page 4 GAO-16-73 Medicaid and Exchanges

 
interviewed IRS officials on this process, including how the agency might 

identify cases of duplicate coverage.12

To examine the extent to which individuals are transitioning between 

Medicaid and exchange coverage, we interviewed officials from our eight 

selected states about the availability of data that would allow for analysis 

of the extent of transitions and requested and analyzed the data where 

available. Specifically, we analyzed data available from three of the states 

on the number of individuals who transitioned (1) from Medicaid to 

exchange coverage and (2) from exchange to Medicaid coverage in 2014 

and whether the movement was to or from subsidized versus 

unsubsidized exchange coverage. We interviewed CMS officials about 

state and federal data sources that would allow for analysis of the extent 

of transitions in FFE states and whether CMS had conducted or planned 

to conduct any such analysis. To assess the reliability of the state data, 

we performed manual tests of the data to identify any outliers or 

anomalies, followed up with officials as necessary, and incorporated the 

corrections we received. We determined that the data were sufficiently 

reliable for the purposes of this report.

To examine the participation of issuers in both Medicaid and exchange 

coverage in a state, we collected and analyzed data from our eight 

selected states on the extent to which issuers offered both Medicaid and 

exchange coverage in those states in 2014 and 2015, as well as the 

extent to which Medicaid and exchange enrollees were enrolled in those 

issuers’ plans in 2014.13 We also reviewed an analysis CMS performed 

on the extent to which issuers offered both Medicaid and exchange 

coverage in all states with Medicaid managed care in 2014. To 

12The premium tax credit may be paid to issuers during the coverage year—in advance of 

tax filing—to reduce eligible enrollees’ premium costs for exchange plans. However, the 

final amount of the credit is determined when the enrollee files an income tax return for the 

taxable year. This reconciliation process may result in a tax liability or refund if the 

enrollee’s actual, reported household income is greater or less than the anticipated 

income on which the advance payments of the tax credit were based. See 26 U.S.C.

§ 36B(f); 26 C.F.R. § 1.36B-4(a). 

13In requesting data from states, we asked that states consider issuers managed by the 

same parent company to be equivalent when listing issuers that offered both types of 

coverage. One state, Texas, was not able to provide complete information on issuers 

offering both types of coverage. In this case, we supplemented state data with publicly 

available CMS data and used identical name matches to determine which issuers offered 

both types of coverage. We did not determine whether multiple issuers in Texas were 

affiliated with the same parent company. 

Page 5 GAO-16-73 Medicaid and Exchanges

 
supplement these analyses, we interviewed officials from our selected 

states about issuer participation in Medicaid and exchange coverage in 

those states as well as the implications of such participation for 

individuals transitioning between the coverage types. In addition, we 

interviewed representatives of our selected issuers about their Medicaid 

and exchange coverage in states in which they offered both, as well as 

their experiences offering such coverage. To assess the reliability of the 

data we received from states and CMS, we performed manual and 

electronic tests of the data to identify any outliers or anomalies, clarified 

with officials as necessary, and incorporated the corrections we received. 

We determined that the data were sufficiently reliable for the purposes of 

this report.

The information that we obtained from our selected states and issuers 

cannot be generalized to other states. We conducted this performance 

audit from October 2014 through September 2015 in accordance with 

generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives.

Beginning January 1, 2014, PPACA required most citizens and legal 

residents of the United States to maintain health insurance that qualifies 

as minimum essential coverage for themselves and their dependents or 

pay a tax penalty.14 Most Medicaid coverage and private health insurance 

coverage purchased through the exchanges qualifies as minimum 

14Individuals are exempt from the requirement to have minimum essential coverage when 

such coverage is not “affordable,” as defined by PPACA. In general, individuals qualify for 

the affordability exemption if they would have to pay more than 8.05 percent in 2015 of 

their household income for the lowest-cost self-only health plan that is available to the 

individual. Similarly, families are exempt when the lowest-cost health plan available to the 

family exceeds 8.05 percent of household income. Other exemptions may be available for 

certain eligible individuals, such as those determined to have suffered certain hardships, 

members of Native American tribes, and those who qualify for an exemption for religious 

reasons.

Background

Page 6 GAO-16-73 Medicaid and Exchanges

 
essential coverage.15 To expand individuals’ access to minimum essential 

coverage, PPACA provided states the option to expand eligibility for 

Medicaid coverage, with increased federal financing for the newly eligible 

population.16 As of January 2014, 25 states had expanded their Medicaid 

programs, and an additional 4 states had expanded as of March 2015.17

Beginning in October 2013, individuals were able to shop for private 

health insurance qualifying as minimum essential coverage through the 

exchanges, with coverage effective beginning as early as January 1, 

2014. As of March 2015, the federal government operated an FFE in 34 

states, and 17 states were approved to operate SBEs (see fig. 1).18

States with SBEs may use the FFE IT systems for eligibility and

enrollment functions. In 2014, two states with SBEs used the FFE IT 

systems for eligibility and enrollment, while in 2015 three states with 

SBEs did so.19

15Coverage through the State Children’s Health Insurance Program (CHIP) also qualifies 

as minimum essential coverage. CHIP is a joint federal-state program that finances health

insurance for low-income children whose household incomes are above the threshold for 

Medicaid eligibility. Health insurance coverage that provides limited benefits, such as 

dental-only coverage, does not constitute minimum essential coverage.

16States and the federal government share in the financing of the Medicaid program, with 

the federal government matching most state expenditures for Medicaid services on the 

basis of a statutory formula based in part on a state’s per capita income. Federal law 

specifies that this federal match may range from 50 to 83 percent. For states that expand 

Medicaid, the federal government will pay an enhanced match—100 percent of the cost of 

covering newly eligible enrollees—in 2014, 2015, and 2016, with the federal match 

gradually reduced to 90 percent by 2020. PPACA also permitted an early expansion 

option, whereby states could expand Medicaid coverage for their eligible population (or a 

subset of this population) starting on April 1, 2010, with the regular level of federal 

financial participation until 2014, when the enhanced match rate took effect.

17As of June 2015, an additional state, Montana, had taken steps to expand its Medicaid 

program, with the expansion pending federal approval. For those states that opted not to 

expand Medicaid, eligibility for adults is largely limited to certain categories of low-income 

individuals, such as pregnant women and individuals who are aged or disabled.

18Some states that elected not to establish an SBE entered into a partnership with CMS in 

which CMS established and operates the exchange while states assist with certain 

functions of the exchange. Because a partnership exchange is a variation of an FFE, we 

include partnership states as FFE states in this report.

19In 2014, Idaho and New Mexico used the FFE IT systems. In 2015, Idaho used its own 

SBE system, while two additional SBE states—Oregon and Nevada—began using the 

FFE IT systems.

Page 7 GAO-16-73 Medicaid and Exchanges

 
Page 8 GAO-16-73 Medicaid and Exchanges 

Figure 1: State Exchange Type and Medicaid Expansion Status as of March 2015 

Note: Idaho and New Mexico used the federally facilitated exchanges’ information technology 

systems in 2014, while Nevada, New Mexico, and Oregon did so in 2015. 
PPACA also created federal subsidies for exchange coverage, most 

notably the premium tax credit available to eligible individuals with 

household incomes between 100 and 400 percent of the FPL. Individuals 

eligible for Medicaid or other minimum essential coverage, such as 

qualifying employer-sponsored coverage, are not eligible for the premium 

tax credit. The tax credit is refundable and is generally paid to issuers in 

advance to reduce enrollees’ premium costs for exchange plans. 

Advance payments of this tax credit are known as advance premium tax 

credits (APTC) and are calculated based on an eligible individual’s family 

size and anticipated household income relative to the cost of premiums 

for a benchmark plan.20 According to HHS, approximately 87 percent of 

individuals selecting a plan for the 2015 coverage year in FFE states 

qualified for the APTC, with an average per person, monthly APTC 

amount ranging from $155 in Arizona to $534 in Alaska, and an average 

reduction in premiums of about 72 percent.21 In addition to the premium 

tax credit, PPACA provides for cost-sharing reductions to reduce out-ofpocket costs, such as deductibles and copayments, for eligible individuals 

with household incomes between 100 and 250 percent of the FPL.22

20The benchmark plan is the second-lowest-cost silver tier plan available in the state’s 

exchange, with silver tier referring to the plan’s actuarial value (plans are also available 

within other metal tiers, such as gold and platinum, and the tiers have different actuarial 

values as established by PPACA). The individual is to receive an APTC amount based on

this benchmark plan even if the individual chooses to enroll in a different plan.

Because APTC is calculated based on an eligible individual’s anticipated household 

income, individuals receiving APTC must file federal income tax returns with the IRS to 

reconcile the amount of the premium tax credit allowed with the amount received in 

advance. If the amount of APTC paid to the issuer based on the individual’s anticipated 

income exceeds the amount allowed based on the individual’s reported income, the 

individual owes the excess amount as an additional income tax liability, subject to certain 

caps. As an alternative to APTC, individuals may claim the credit when filing their tax 

return for the year, which will either lower the amount of taxes owed on that return or 

increase their refund based on their reported income.

21In addition to the 34 FFE states, these estimates also included the 3 SBE states using 

the FFE IT systems in 2015. See Department of Health and Human Services, Office of the 

Assistant Secretary for Planning and Evaluation, Health Insurance Marketplaces 2015 

Open Enrollment Period: March Enrollment Report (Washington, D. C.: Mar. 10, 2015).

22Individuals must enroll in a silver tier plan through an exchange to receive cost-sharing 

reductions.

Page 9 GAO-16-73 Medicaid and Exchanges

 
PPACA required the establishment in all states of a coordinated eligibility 

and enrollment process for Medicaid and the exchanges. Since the 

enactment of the law in March 2010, CMS has issued regulations and 

technical guidance outlining aspects of this coordination. In particular, 

exchanges and state Medicaid agencies must enter into agreements with 

one another to ensure prompt eligibility determinations and enrollment of 

individuals in the appropriate programs regardless of where they apply, 

and must transmit individuals’ account information—that is, their 

records—via secure electronic interface. However, the mechanisms 

through which this coordination occurs may vary depending on the state.

• In FFE states, CMS has established an account transfer process 

through which accounts for individuals enrolled in or applying for 

exchange or Medicaid coverage are electronically transmitted 

between CMS and state Medicaid agencies where appropriate. If 

individuals apply for coverage in an FFE state, CMS is responsible for 

determining or assessing individuals’ eligibility for Medicaid and 

determining eligibility for exchange coverage, including exchange 

subsidies and, if applicable, facilitating enrollment in an exchange 

plan.23 If CMS determines or assesses that an individual is or may be 

eligible for Medicaid, it must transfer the individual’s account to the 

appropriate state Medicaid agency for enrollment, where appropriate. 

Individuals may also apply for coverage directly through the state 

Medicaid agency. In this case, the state is responsible for determining 

eligibility for Medicaid and, for individuals determined ineligible, 

transferring accounts to CMS for a determination of eligibility to enroll 

in subsidized exchange coverage.

• Conversely, states with SBEs are responsible for determining 

eligibility for both Medicaid and exchange coverage, including 

exchange subsidies, as well as enrolling individuals in the appropriate 

programs.

23Some states, known as determination states, have agreed to allow CMS to perform the 

final Medicaid eligibility determination for individuals applying for coverage through the 

FFE in those states, while other states, known as assessment states, perform the final

Medicaid eligibility determination. This also includes determining or assessing, as 

appropriate, eligibility for CHIP.

CMS will only determine or assess individuals’ eligibility for Medicaid or determine 

eligibility for exchange subsidies if individuals request a determination for insurance 

affordability programs—which include Medicaid, CHIP, and exchange subsidies—in their 

coverage application.

Medicaid and Exchange 

Eligibility and Enrollment 

Policies and Procedures

Page 10 GAO-16-73 Medicaid and Exchanges

 
There are differences in eligibility and enrollment policies for Medicaid 

and exchange coverage.

• Medicaid. Individuals may enroll in Medicaid coverage at any point in 

time during the year, with their coverage effective as of the date of 

application, reported eligibility change, or earlier.24 Individuals enrolled 

in Medicaid are generally required to report any changes—such as 

changes to income or household composition—that may affect their 

Medicaid eligibility.25 Outside of self-reported changes, eligibility for 

Medicaid must generally be redetermined every 12 months.26 When 

individuals are determined ineligible for Medicaid, states are required 

to send them notification that their coverage will be terminating at 

least 10 days prior to their Medicaid termination date.27 In addition, 

states may opt to extend Medicaid coverage through the end of the 

month if it would otherwise be terminated earlier in the month.

• Exchange coverage. Individuals’ options for enrollment in exchange 

coverage are generally restricted to an annual open enrollment period 

that starts near the end of the calendar year, unless they experience a 

change that qualifies them for a special enrollment period.28

Exchange coverage is generally prospective, meaning that individuals 

must select an exchange plan by a certain date in order to have 

coverage effective the following month.29 If individuals choose to end 

24States may choose to make coverage effective on the first day of the month in which the 

individual applied if the individual was eligible at any time during that month. 42 C.F.R. 

§ 435.915(b). In addition, under certain circumstances, Medicaid coverage could be 

effective up to 3 months prior to the month of application or reported eligibility change; this 

is known as retroactive Medicaid coverage. Individuals may be eligible for retroactive 

coverage if they received covered services during the 3 months prior to the month of 

application or reported eligibility change and would have been eligible for Medicaid at the 

time. 42 C.F.R. § 435.915(a).

2542 C.F.R. § 435.916(c).

26This requirement applies to individuals whose Medicaid eligibility is determined based 

on modified adjusted gross income—PPACA’s new uniform method of calculating income. 

For other Medicaid enrollees, eligibility must be redetermined at least every 12 months, 

but could be redetermined more frequently. 42 C.F.R. § 435.916(a)-(b).

2742 C.F.R. §§ 431.200(b), 431.211.

2845 C.F.R. §§ 155.410, 155.420.

29See 45 C.F.R. § 155.410(c). In some cases, such as in the birth of a child, the coverage 

may be retroactive—in this case to the date of birth.

Page 11 GAO-16-73 Medicaid and Exchanges

 
their exchange coverage, they must generally provide advance notice 

at least 14 days before the requested termination date.30 As with 

Medicaid, individuals enrolled in subsidized exchange coverage are 

required to report any changes that may affect their eligibility. 

Eligibility for subsidized exchange coverage is redetermined during 

open enrollment and any time an individual reports a change, 

regardless of when coverage began during the year. If individuals are 

determined ineligible for continued subsidized exchange coverage, 

such subsidies must be terminated or they may be held liable for 

repayment of the APTC as part of the reconciliation process with IRS.

The coordination of federal payments for individuals transitioning between 

Medicaid and subsidized exchange coverage is addressed through 

Medicaid’s third party liability rule and IRS’s reconciliation process for the 

APTC. Specifically:

• Third party liability in Medicaid. Where individuals are enrolled in 

Medicaid along with another form of coverage, Medicaid operates as 

the payer of last resort. This means that the other source of coverage 

must pay to the extent of its liability before Medicaid pays, referred to 

as third party liability.31 For example, for individuals enrolled in both 

Medicaid and exchange coverage for some period of time, the issuer 

of exchange coverage is required to pay to the extent of its liability 

before Medicaid does.

• Reconciliation of the APTC with the IRS. Individuals enrolled in 

exchange coverage and receiving the APTC must file federal income 

tax returns with the IRS to reconcile the amount of the premium tax 

credit allowed with the amount received in advance, and may be liable 

to pay back any excess credits received during the taxable year.32 For 

individuals transitioning from exchange coverage to Medicaid during 

30Individuals may submit a request to their issuer to terminate exchange coverage fewer 

than 14 days from the date of the request.

31See generally 42 C.F.R. § 433.135 et seq. In administering their Medicaid programs, 

states are required to take certain steps to identify sources of third-party coverage that 

Medicaid enrollees may have and to ensure that these sources pay to the extent of their 

liability. When private third parties, such as issuers, pay for health care services instead of 

Medicaid, savings accrue to states and the federal government.

3226 C.F.R. § 1.36B-4.

Page 12 GAO-16-73 Medicaid and Exchanges

 
the year, this reconciliation could include repayment of APTC received 

after an individual was determined eligible for Medicaid.33

Most state Medicaid programs have implemented managed care 

systems, under which the state pays contracted issuers a set amount per 

beneficiary per month to arrange for all covered services and the issuer 

assumes the risk for the cost of providing those services.34 In states that 

offer managed care in their Medicaid programs, issuers have the potential 

to participate in both Medicaid and the exchange market. Issuers 

approved to offer Medicaid managed care, exchange coverage, or both, 

must comply with applicable state and federal requirements for the 

respective programs. For example, issuers offering Medicaid managed 

care must comply with any applicable state and federal restrictions on 

marketing their plans to Medicaid beneficiaries. In addition, some states 

may require issuers contracting with the Medicaid program to offer such 

coverage statewide, while in other states issuers may offer their Medicaid 

coverage statewide or to enrollees in selected geographic regions within 

the state. Issuers of exchange coverage have the option of offering their 

exchange plans statewide or within selected geographic regions.

33Per IRS regulations, individuals determined eligible for Medicaid are liable for repaying 

any APTC received the first day of the month following the Medicaid eligibility 

determination, subject to certain caps on repayment for individuals who have income less 

than 400 percent of the FPL. 26 C.F.R. § 1.36B-2(c)(2)(iv). For the 2014 tax year these 

caps ranged from $300 to $2,500. 26 C.F.R. § 1.36B-4(a)(3). However, if individuals are 

determined eligible for and receive the APTC during a tax year, but their incomes fall back 

into the Medicaid eligibility range later that year, they are not liable for repaying any 

excess premium tax credits as long as they were not determined eligible for Medicaid. See 

26 C.F.R. § 1.36B-2(c)(2)(v).

34According to CMS officials, 40 states offered comprehensive, risk-based managed care 

in 2014. The alternative to a managed care model is fee-for-service, in which states pay 

health care providers for each service delivered.

Issuer Requirements for 

Participation in Medicaid 

Managed Care and 

Exchange Coverage

Page 13 GAO-16-73 Medicaid and Exchanges

 
Information from CMS and selected states and issuers indicates that 

individuals transitioning from Medicaid to exchange coverage may 

experience coverage gaps, and that duplicate coverage is occurring 

under several scenarios. CMS and our selected states had a number of 

enrollment policies, IT mechanisms, and consumer education efforts that 

minimize the potential for coverage gaps and duplicate coverage; 

however, our assessment of CMS’s policies and procedures for FFE 

states found that additional controls are needed.

Officials from CMS and four of our eight selected states told us that 

individuals may experience gaps in coverage when transitioning between 

Medicaid and exchange coverage, though they did not have information 

on the extent to which such gaps were occurring. Specifically, as 

Medicaid coverage is effective as of the date an eligibility change is 

reported or earlier, officials from two states explained that coverage gaps 

should generally not occur for individuals who lose eligibility for exchange 

coverage and are transitioning to Medicaid.35 However, as exchange 

coverage is generally prospective, coverage gaps could occur in the other 

direction. In particular, officials from one state told us that individuals who 

lose eligibility for Medicaid toward the end of a month may be more likely 

to experience coverage gaps because they would have a short window of 

time to enroll in exchange coverage so that coverage is effective the first 

day of the following month.36 Individuals who experience gaps in 

coverage may decide to forgo necessary care rather than pay out-ofpocket, which could negatively affect health outcomes and result in sicker 

individuals enrolling in exchange coverage.

35According to CMS officials, gaps could occur if individuals failed to take steps to finalize 

Medicaid enrollment.

36According to the officials, this state extends Medicaid coverage through the end of the 

month in which individuals become ineligible. States are not required to do so. While CMS 

officials could not tell us the number of states that have implemented this policy, the 

agency has publicly stated that many states have. In states that do not extend Medicaid 

coverage through the end of the month, coverage gaps may be likely to occur regardless 

of when in the month individuals lose eligibility for Medicaid.

CMS’s Policies and 

Procedures Do Not 

Sufficiently Minimize 

the Potential for 

Coverage Gaps and 

Duplicate Coverage 

in Federal Exchange 

States

Individuals Transitioning 

between Medicaid and the 

Exchanges May 

Experience Coverage 

Gaps or Duplicate 

Coverage under Certain 

Circumstances

Page 14 GAO-16-73 Medicaid and Exchanges

 
Information from selected states and issuers indicated that duplicate 

coverage—that is, enrollment in both Medicaid and subsidized exchange 

coverage—was occurring under the three scenarios outlined below, the 

first of which is permitted under federal law. However, the full extent to 

which duplicate coverage was occurring was unknown.

• Scenario 1: Individuals who are completing the transition from 

subsidized exchange to Medicaid coverage. According to officials 

from three of our eight selected states, some amount of duplicate 

coverage may be expected for individuals transitioning from 

subsidized exchange coverage to Medicaid. For example, if an 

individual with subsidized exchange coverage reports a change and is 

determined eligible for Medicaid on September 16th, the individual 

could have duplicate coverage for the period of September 16th 

through September 30th. This is primarily due to differences in the 

effective dates of coverage. Medicaid coverage is effective as of the 

date an eligibility change is reported or earlier—while in general 

exchange coverage can only be terminated prospectively, generally 

with at least 14 days advance notice.37 The period of duplicate 

coverage could be extended if the Medicaid eligibility determination 

takes longer—and per federal regulations it can take up to 45 days for 

applicants not applying on the basis of disability.38 This transitional 

period of duplicate coverage is permitted under the law; that is, 

individuals are permitted to be enrolled in both types of coverage 

through the end of the month of the Medicaid eligibility 

determination.39

• Scenario 2: Individuals who do not end their subsidized 

exchange coverage after being determined eligible for Medicaid.

One of our selected states identified that 3,500 individuals had 

duplicate coverage at some point from January to July 2014, in part 

because some of the individuals did not end their subsidized coverage 

after being determined eligible for Medicaid. Individuals may not end 

subsidized exchange coverage for a variety of reasons, including that, 

depending on their income level and plan selection, some individuals 

37Individuals may submit a request to their issuer to terminate exchange coverage fewer 

than 14 days from the date of the request.

38See 42 C.F.R. § 435.912(c)(3)(ii). The determination can take up to 90 days for 

applicants applying on the basis of disability.

39See 26 U.S.C. § 36B(c)(2)(A)-(B); 26 C.F.R. § 1.36B-2(c)(iv).

Page 15 GAO-16-73 Medicaid and Exchanges

 
receiving subsidies may not have to make a premium payment and 

thus may not realize they are still enrolled and need to take steps to 

end their coverage.40 If individuals do not end coverage, but stop 

paying premiums once Medicaid coverage begins, the APTC must still 

be paid out for a 3-month grace period after premium payments have 

ceased, though issuers must return the APTC amount for the final 

2 months of this period under certain circumstances.41

• Scenario 3: Individuals who enroll in subsidized exchange 

coverage when already enrolled in Medicaid. One of our selected 

issuers reported that a small number of individuals enrolled in one of 

the issuer’s Medicaid plans and later also obtained subsidized 

coverage through one of its exchange plans—18 individuals as of 

February 2015.42 Officials from the Medicaid agency in the state 

where this issuer operates also told us that they had identified cases 

of duplicate coverage by selecting a small sample of individuals from 

one of their Medicaid issuers, and that they had heard from some 

other issuers in the state that they had members enrolled in both 

coverage types. Additionally, another of our selected issuers reported 

that one of its plans had experienced a number of instances of 

duplicate coverage—which tended to last for many months—and that 

the volume had increased during 2015 open enrollment for exchange 

coverage, likely because Medicaid coverage was not identified.

To the extent duplicate coverage occurs, there could be financial 

implications for the federal government. In cases where the state 

Medicaid program has identified that an individual is enrolled in exchange 

coverage—and Medicaid is operating as the payer of last resort—there 

may not be a significant difference in federal costs for the individual 

during the period of duplicate coverage compared with what would have 

been spent if duplicate coverage had not occurred. However, evidence 

suggests that some states may face challenges identifying exchange 

40According to CMS officials, these individuals would receive a bill indicating that their 

premiums for exchange coverage are covered by APTC.

41If individuals do not pay outstanding premiums during the entire 3 month period, 

coverage is terminated retroactive to the last day of the first month of the period and 

issuers are required to return the APTC received for the second and third months of the 

period. See 45 C.F.R. § 156.270.

42This issuer’s experience with duplicate coverage is limited to enrollment within its own 

health plans, which could underestimate the degree to which it is occurring more 

generally.

Page 16 GAO-16-73 Medicaid and Exchanges

 
coverage. We recently found that states face challenges identifying 

whether Medicaid enrollees have other sources of coverage, which could 

include exchange coverage.43 In addition, officials from our four selected 

FFE states told us that they do not currently have access to exchange 

enrollment information, and that such information could help them better 

identify information on Medicaid enrollees’ other sources of coverage. 

CMS officials told us that CMS has provided exchange enrollment data to 

one state that requested it for third-party liability purposes, and the 

agency would consider the appropriateness of providing such data to 

other states if requested.

If the state is not aware of an individual’s exchange coverage, the federal 

government could be paying twice—that is, subsidizing exchange 

coverage and reimbursing states for Medicaid spending for the same 

individual.44 The risk of duplicate payments may be higher in states with 

higher Medicaid managed care penetration as the state pays issuers a 

monthly fee for each enrolled individual, regardless of whether services 

are received. The tax reconciliation process for the APTC has the 

potential to reduce the financial implications of any duplicate payments. 

However, according to IRS officials, the IRS will generally not have the 

information necessary to identify duplicate coverage as part of reconciling 

the amount of the APTC an individual may owe until 2016—that is, the tax 

filing season for tax year 2015—when states are required to report 

Medicaid enrollment data to IRS.45 Officials told us that once IRS begins 

receiving the data their ability to identify the need for repayment due to 

duplicate coverage will depend on the quality of the data and the IRS’s 

available resources. Officials said that depending on resources, they may 

check for Medicaid coverage for each individual receiving the APTC or for 

a sample of individuals.

43We found that states face challenges to their third-party liability efforts—efforts to 

identify and collect payment from other insurance held by Medicaid enrollees—and 

recommended additional federal actions to improve such efforts. HHS concurred with our 

recommendations and noted plans to address them. See GAO, Medicaid: Additional 

Federal Action Needed to Further Improve Third-Party Liability Efforts, GAO-15-208. 

(Washington, D.C.: Jan. 28, 2015).

44Subsidizing exchange coverage could include payments of the APTC and, for those 

eligible, cost-sharing reductions for any services used.

45Officials explained that, prior to 2016, if a taxpayer is under audit for APTC for a reason 

other than duplicate coverage, it is possible that the IRS would find that the individual was 

also enrolled in Medicaid during the course of the audit.

Page 17 GAO-16-73 Medicaid and Exchanges

 
Duplicate coverage could also have financial implications for individuals. 

As long as individuals end subsidized exchange coverage upon receiving 

their Medicaid eligibility determination, they would generally not be liable 

for repaying the APTC received during the transitional period of duplicate 

coverage discussed in the first scenario above; however, according to 

CMS officials, individuals would be responsible for their portion of the 

exchange premiums during this period. To the extent duplicate coverage 

occurs outside of the transitional period and the IRS identifies duplicate 

coverage during the tax reconciliation, individuals may be liable for 

repaying all or a portion of the APTC received.46

CMS and our selected states had policies and procedures that minimize 

the potential for coverage gaps or duplicate coverage when individuals 

transition between Medicaid and the exchanges.

• Enrollment-related: CMS and selected states had enrollment policies 

and procedures that minimize the potential for coverage gaps by 

facilitating alignment of Medicaid and exchange coverage periods. For 

example, for individuals transitioning from Medicaid to exchange 

coverage, CMS requires that, as long as individuals select an 

exchange plan on or before the day that Medicaid coverage ends, 

exchanges must ensure that coverage is effective on the first day of 

the following month.47 In contrast, most individuals enrolling in 

exchange coverage must select a plan by the fifteenth of the month in 

order to have a coverage effective date for the first day of the 

following month. Additionally, in February 2015, CMS adopted a new 

regulation governing premium payments in FFE states, allowing 

individuals transitioning from Medicaid 30 calendar days from 

enrolling in exchange coverage to pay their first premium.48 At the 

46Per IRS regulations, individuals determined eligible for Medicaid are liable for repaying 

premium tax credits received the first day of the month following the Medicaid eligibility 

determination, subject to certain caps on repayment for individuals who have income less 

than 400 percent of the FPL. For the 2014 tax year these caps ranged from $300 to 

$2,500. See 26 C.F.R. §§ 1.36B-2(c)(2)(iv), 1.36B-4(a)(3).

47See 45 C.F.R. § 155.420(b)(iv), (d)(1)(i). According to CMS officials, for individuals 

transitioning from Medicaid to exchange coverage in FFE states, exchange coverage will 

begin the first day of the month following the date of plan selection.

48See HHS Notice of Benefit and Payment Parameters for 2016, 80 Fed. Reg. 10750, 

10866 (Feb. 27, 2015) (to be codified at 45 C.F.R. § 155.400(e)(1)(ii)). This regulation 

took effect on April 28, 2015.

CMS and States Had 

Policies and Procedures 

That Minimize the 

Potential for Coverage 

Gaps and Duplicate 

Coverage, but Additional 

Controls Are Needed in 

Federal Exchanges

Page 18 GAO-16-73 Medicaid and Exchanges

 
state level, officials from one state told us they increased the deadline 

for mailing notification of Medicaid coverage termination to 20 days 

prior to termination instead of the minimum required 10, so that 

individuals have more time to shop for a plan on the exchange. 

Additionally, officials from all of our selected states reported extending 

Medicaid coverage to at least the end of a month even when an 

individual becomes ineligible for Medicaid coverage earlier in the 

month.49

• IT-related: CMS and selected SBE states also had IT-related policies 

and procedures that minimize the potential for coverage gaps as well 

as duplicate coverage. For example, in FFE states, when individuals 

are determined potentially eligible for subsidized exchange coverage, 

CMS conducts automated checks of state IT systems to determine if 

individuals already have Medicaid coverage, thus helping to prevent 

duplicate coverage.50 At the state level, officials from all four of our 

selected SBE states reported that their states had implemented 

integrated eligibility and enrollment systems for Medicaid and 

exchange coverage that, among other things, helped avoid gaps in 

coverage by making eligibility determinations in real time: in other 

words, at the time an individual reports a change.51 Officials also said 

that these integrated systems included system rules that help prevent 

duplicate coverage by not allowing an individual to be determined 

49Officials in these states generally reported that Medicaid coverage would be extended to 

the end of the second following month if coverage was terminated less than 10 days 

before the end of a month. In New York, individuals have 12 month continuous eligibility 

for Medicaid and if an individual becomes ineligible for Medicaid during an eligibility 

redetermination, the individual is given 60 days advance notice that Medicaid coverage 

will end.

50This also includes a check for CHIP coverage. For this check to work, states’ Medicaid 

IT systems must respond to electronic inquiries from the FFE on applicants’ current 

Medicaid coverage. We previously reported that while none of the 36 states using the FFE 

in 2014 were able to perform this check as of October 1, 2013—the first day of the initial 

open enrollment period for exchange coverage—most states were able to implement this 

functionality over time. See GAO, Medicaid: Federal Funds Aid Eligibility IT System 

Changes, but Implementation Challenges Persist, GAO-15-169 (Washington, D.C.: 

Dec. 12, 2014). According to CMS officials, six states—Alaska, Kansas, New Jersey, 

Tennessee, Oregon, and Wyoming—remained unable to perform this check as of July 

2015. This check supplements the question in the application asking the applicant to attest 

to whether they have minimum essential coverage, including Medicaid or CHIP.

51While real time determinations are the goal, some may take longer, if, for example, 

individuals are missing information on their applications. One of our selected SBE states 

reported that as of May 2015, 78 percent of the eligibility determinations through its 

integrated system were being made in real time. 

Page 19 GAO-16-73 Medicaid and Exchanges

 
eligible for Medicaid and exchange subsidies simultaneously.52 In 

addition, officials from three of these states noted that their systems 

automatically terminate subsidized exchange coverage once 

individuals are determined eligible for Medicaid, while officials in the 

fourth state said their systems would have this ability beginning in 

September 2015.53

• Consumer education-related: Both CMS and an SBE state reported 

including guidance on exchange websites that could help individuals 

avoid coverage gaps and duplicate coverage during the transition 

between Medicaid and exchange coverage. For example, CMS has 

added guidance on coverage transitions on the FFE website that 

outlines the steps individuals must take when they have subsidized 

exchange coverage and are later determined eligible for Medicaid, 

including that they are responsible for ending subsidized exchange 

coverage. CMS also notifies individuals in FFE states of this 

responsibility when they are enrolling in exchange coverage. Similarly, 

officials from one of our SBE states said that they have tried to 

improve the clarity of instructions on their exchange website, because 

most individuals are making eligibility changes online.

Despite the steps CMS has taken, its current policies and procedures do 

not sufficiently minimize the potential for coverage gaps and duplicate 

coverage in the 34 states that had an FFE in 2015.54 According to federal 

internal control standards, in its responsibilities for administering and 

overseeing Medicaid and the exchanges, CMS should design and 

52Officials from one of our SBE states did not have an integrated system at the start of 

2014 and, after identifying duplicate coverage was occurring, set up a manual process to 

check for it on a bi-weekly basis and resolve any identified cases. While the state now has 

an integrated system, officials said they are continuing the manual process as an 

additional check.

53For our reporting purposes, automatically terminating subsidized exchange coverage 

refers to automatically terminating exchange subsidies, including the APTC. Some states 

may automatically terminate exchange subsidies as well as enrollment in an exchange 

plan. According to state officials, in two of the three states, subsidized exchange coverage 

is automatically terminated the month of the Medicaid eligibility determination. In the third 

state, such coverage is automatically terminated at the end of the month of the 

determination if the determination occurs prior to the twenty-third of the month. If the 

determination occurs after the twenty-third of the month, automatic termination occurs at 

the end of the following month.

54The control weaknesses we identified for the 34 FFE states also apply to SBE states 

using the FFE IT systems, which in 2015 were Nevada, New Mexico, and Oregon.

Page 20 GAO-16-73 Medicaid and Exchanges

 
implement necessary policies and procedures to enforce agency 

objectives and assess program risk. These policies and procedures 

should include internal controls, such as conducting monitoring to assess 

performance over time, that provide reasonable assurance that an 

agency has effective and efficient operations and that program 

participants are in compliance with applicable laws and regulations.

55 We 

identified a number of weaknesses in CMS’s controls for minimizing 

coverage gaps and duplicate coverage for individuals transitioning 

between Medicaid and exchange coverage in FFE states.

With regard to coverage gaps, we found that CMS’s controls do not 

provide reasonable assurance that the accounts of individuals 

transitioning from Medicaid to exchange coverage in FFE states are 

transferred by states in near real time, which puts individuals in these 

states at greater risk of experiencing such gaps. Specifically, federal 

regulations require that state Medicaid agencies should transfer accounts 

to CMS promptly and without undue delay.56 However, according to CMS 

officials, as of July 2015, the agency was not monitoring the timeliness of 

account transfers from states, and thus CMS would not be aware if 

account transfers from FFE states were happening promptly. CMS 

officials told us that account transfers are not happening in real time, but 

their understanding was that states typically send transfers at least 

daily.57 Officials from three of our four selected FFE states reported that 

account transfers were occurring at least daily, while officials from the 

remaining state reported that transfers were sent to CMS three times per 

week.

Given the number of steps involved in the transition from Medicaid to 

exchange coverage, individuals may be more likely to have gaps in 

coverage to the extent account transfers from states to CMS are not

happening in a timely fashion. For example, if a state sends a notification 

of termination on September 20, individuals could have just over a week 

55See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

5642 C.F.R. § 435.1200(e).

57In December 2014, we reported on account transfers in FFE states and found that the 

capability to conduct real time transfers for immediate eligibility determinations remained 

elusive in all states and would likely not begin in most states for years. See GAO-15-169.

Control Weaknesses Related 

to Coverage Gaps

Page 21 GAO-16-73 Medicaid and Exchanges

 
to have their accounts transferred, apply for exchange coverage, and 

select a plan to avoid a coverage gap (see fig. 2).58

58This scenario assumes the state follows the 10-day minimum for notification of Medicaid 

termination and extends Medicaid coverage to the end of the month an eligibility change is 

reported. CMS officials noted that, rather than waiting for the account transfer to occur, 

individuals could also submit a new application. However, individuals may not do so and, if 

they did, would need to fill out an entirely new application rather than complete one that is 

prepopulated through the account transfer process.

Page 22 GAO-16-73 Medicaid and Exchanges

 
Figure 2: Illustration of the Transition from Medicaid to Exchange Coverage in a Federally Facilitated Exchange State Via the

Account Transfer Process

Note: This illustration assumes that Medicaid eligibility is determined the day after the change was 

reported, the state notifies the individual on the date of the eligibility determination, and the state 

extends Medicaid coverage to the end of the month in which an eligibility change is reported. To the 

extent certain steps in this illustration take longer, the amount of time an individual has to avoid a 

coverage gap would be less or a coverage gap would be more likely to occur.

Page 23 GAO-16-73 Medicaid and Exchanges
With regard to duplicate coverage, we found weaknesses in CMS’s 

controls for preventing, detecting, and resolving duplicate coverage in 

FFE states.

• Vulnerabilities in methods to prevent individuals from 

maintaining subsidized exchange coverage after being 

determined eligible for Medicaid. Individuals in FFE states might 

not end subsidized exchange coverage when they are determined 

eligible for Medicaid. According to CMS officials, in April 2015, the 

agency revised the notice individuals receive when they are 

determined eligible or potentially eligible for Medicaid to make clear 

individuals are responsible for doing so. However, individuals who 

apply for Medicaid directly through their state Medicaid agency may 

not receive such notification. In addition, CMS does not have 

procedures to automatically terminate subsidized exchange coverage 

when individuals are determined eligible for Medicaid, though CMS 

officials told us that they are considering options for doing so in the 

future.59

• Vulnerabilities in methods to prevent individuals enrolled in 

Medicaid from enrolling in subsidized exchange coverage. While 

CMS generally checks for Medicaid coverage before initially 

determining someone eligible for subsidized exchange coverage, 

officials recognized that there are limitations to this check. 

Specifically, officials said these checks identify at a point in time 

whether the person is enrolled in Medicaid. Thus, if, for example, the 

Medicaid determination was pending, CMS would not know that from 

the check. Also, according to CMS officials, CMS is not able to 

conduct checks for Medicaid for the small percentage of individuals 

who do not provide social security numbers on their applications.60

Further, CMS did not perform a check for Medicaid coverage for the 

1.96 million individuals who were auto-reenrolled in exchange 

59For our reporting purposes, automatically terminating subsidized exchange coverage 

refers to automatically terminating exchange subsidies, including the APTC.

60CMS officials explained that applicants may not be able to provide a social security 

number because they are in the process of applying for one or have applied but not yet 

received one. Officials said that exchanges cannot deny an application on the basis of the 

applicant not being able to provide a social security number. Applicants who have a social 

security number are required to provide one at the time of application. 

Control Weaknesses Related 

to Duplicate Coverage

Page 24 GAO-16-73 Medicaid and Exchanges

 
coverage during 2015 open enrollment for FFE states.61 The absence 

of such a check increases the risk that duplicate coverage occurring 

during the year would continue when individuals are enrolled in 

subsidized exchange coverage for another year.

• No methods to detect and resolve duplicate coverage. As of July 

2015, CMS did not have procedures to detect and resolve cases of 

duplicate coverage in FFE states. Further, CMS had generally not 

provided FFE states with exchange enrollment information that they 

would need to identify cases of duplicate coverage.

While CMS has not conducted a formal risk assessment to identify the 

potential causes of duplicate coverage in FFE states, CMS officials told 

us that the agency has a number of planned steps to address the risk. 

The planned approach focuses on taking steps to identify and resolve 

rather than prevent duplicate coverage. Specifically, CMS has plans to 

implement periodic checks for duplicate coverage starting in the summer 

of 2015, and CMS officials told us in July 2015 that the first check would 

occur later that month.62 CMS officials estimated that the first check will 

take about 2 to 3 weeks to perform and will involve, among other steps, 

querying each FFE state’s Medicaid system.63 According to the officials, 

after the first check is complete CMS will notify individuals found to have 

duplicate coverage that they must contact the FFE to update their 

coverage information. Further, in 2016, if CMS can build the IT 

functionality to do so, the agency plans to begin automatically terminating 

exchange subsidies if individuals identified through the checks do not 

61During 2015 open enrollment, of those already enrolled in exchange coverage, 

2.21 million actively selected a new plan or renewed their existing plan, while 1.96 million 

auto-reenrolled into an exchange plan. This includes individuals in the 34 FFE states as 

well as the 3 SBE states using the FFE IT systems. See Department of Health and Human 

Services, Office of the Assistant Secretary for Planning and Evaluation, Health Insurance 

Marketplaces 2015 Open Enrollment Period: March Enrollment Report (Washington, 

D. C.: Mar. 10, 2015).

62CMS is required to periodically examine available data sources to identify, among other 

things, if an enrollee for whom ATPCs or cost-sharing reductions are being provided has 

been determined eligible for Medicaid. 45 C.F.R. § 155.330(d). According to CMS officials, 

the periodic check will also include a check for individuals enrolled in both subsidized 

exchange coverage and CHIP.

63Officials were unsure about the length of time that will be required for subsequent 

checks and noted that it will depend in part on how long it takes state systems to process 

the queries from CMS’s systems.

Page 25 GAO-16-73 Medicaid and Exchanges

 
respond within 30 days of being notified.64 CMS officials told us that they 

are considering performing the periodic checks ahead of future open 

enrollment periods for exchange coverage, which could help prevent 

duplicate coverage among those automatically reenrolled in exchange 

coverage. CMS officials told us that the planned checks and notification 

process are a more efficient way of detecting and resolving duplicate 

coverage compared to providing exchange enrollment information to 

states and requiring them to identify duplicate coverage, which CMS 

would then need to resolve.

The effectiveness of CMS’s plans to address duplicate coverage will 

depend in part on how frequently the checks are conducted and, as of 

July 2015, CMS had not yet decided the frequency. CMS officials told us 

that they are considering performing the checks on a regular basis—

possibly quarterly—but said the frequency of the checks will depend in 

part on the agency’s analysis of the first check, including the level of effort 

required by state Medicaid agencies. Determining the frequency of the 

checks after completing an analysis of the first check is reasonable and 

could provide CMS with important insights. However, until CMS 

establishes the frequency of its checks, the risk of duplicate coverage 

going undetected continues to exist. Further, the less frequently the 

checks are conducted, the longer duplicate coverage could last if 

individuals do not independently take steps to end their subsidized 

exchange coverage. For example, for individuals who have subsidized 

exchange coverage and are determined eligible for Medicaid, if the 

checks are conducted monthly, duplicate coverage could last up to 

2 months longer than what might be expected during the transition period; 

64CMS officials said that their tentative plan for notifying individuals after duplicate 

coverage is identified is as follows. Individuals will first receive notification that they have 

30 days to contact the FFE to update their information, which will include attesting to 

whether they are enrolled in Medicaid or other minimum essential coverage. Individuals 

could choose to end their subsidized exchange coverage at this point. If individuals 

believe that the duplicate coverage was identified in error, they may contest the 

determination and will have up to 90 days to provide proof that they are not enrolled in 

other minimum essential coverage. If individuals do not respond to the initial notice, CMS 

will send a second notice 30 days after the mailing date of the initial notice to tell them that 

their exchange subsidies will be terminated at the end of the current or following month, 

depending on whether this final notice is sent on or before the fifteenth of the month. For 

individuals whose subsidies are terminated, the FFE will, as appropriate, recalculate 

subsidies for other individuals on the application.

Page 26 GAO-16-73 Medicaid and Exchanges

 
if quarterly, up to 4 months; and if biannually, up to 7 months (see 

fig. 3).65

65This illustration is based on CMS automatically terminating exchange subsidies after 

consumer inaction. If individuals take steps to end their subsidized exchange coverage 

either before or after being notified, the period of duplicate coverage would be shorter.

Some amount of duplicate coverage is expected as part of the process of transitioning 

from subsidized exchange coverage to Medicaid, primarily because Medicaid coverage is 

effective back to at least the date an eligibility change is reported and because exchange 

coverage can only be terminated prospectively—generally with at least 14 days advance 

notice. 

Page 27 GAO-16-73 Medicaid and Exchanges

 
Figure 3: Potential Length of Duplicate Coverage for Individuals with Subsidized Exchange Coverage Who Become Enrolled 

in Medicaid in FFE States, under Different CMS Policy Options

Notes: FFE states are those with federally facilitated exchanges. CMS refers to the Centers for 

Medicare & Medicaid Services.

Page 28 GAO-16-73 Medicaid and Exchanges
Some amount of duplicate coverage may be expected as part of the process of transitioning from 

subsidized exchange coverage to Medicaid, primarily because Medicaid coverage is effective the 

date an eligibility change is reported or earlier, and because exchange coverage can only be 

terminated prospectively—generally with at least 14 days advance notice unless the issuer approves 

an earlier termination date. This illustration is based on CMS’s reported plan for notifying individuals 

after duplicate coverage is identified and is also based on the following: the Medicaid eligibility 

change being reported and determined on the same day, the state making Medicaid coverage 

effective the first of the month the change was reported, the individual not being eligible for retroactive 

Medicaid coverage, the check for duplicate coverage occurring over the period of one day, CMS 

sending the first notice to the individual on the day duplicate coverage is identified, and the individual 

not responding to the notice. To the extent these factors vary, the length of duplicate coverage 

resulting from the transitional period could be shorter or longer.

a

For example, an individual might take steps to end subsidized exchange coverage if the Internal 

Revenue Service identities that the individual has duplicate coverage during tax reconciliation.

b

If the individual stops paying the exchange premium or takes steps to end subsidized exchange 

coverage either before or after being notified of duplicate coverage, the period of duplicate coverage 

would be shorter.

c

According to CMS officials, individuals will receive notification that they have 30 days to contact the 

FFE to update their information, which will include attesting to whether they are enrolled in Medicaid 

or other minimum essential coverage. Individuals could choose to end their subsidized exchange 

coverage at this point.

In addition, while CMS officials told us that they intend to monitor the 

results of the periodic checks, they do not have a specific plan to routinely 

monitor the effectiveness of their planned checks and other procedures. 

According to CMS officials, the agency is exploring metrics to help 

measure the success of the periodic checks, such as identifying the 

number of people who received notification of duplicate coverage and 

subsequently ended their subsidized exchange coverage. However, CMS 

has not set a level of duplicate coverage that it deems acceptable, both in 

terms of the time period for which individuals have duplicate coverage 

and the proportion of Medicaid or exchange enrollees that experience 

duplicate coverage within a given time frame. Without such thresholds, it 

will be difficult for the agency to provide reasonable assurance that its 

procedures are sufficient or whether additional steps are needed.

Page 29 GAO-16-73 Medicaid and Exchanges
Data from three of our selected states—Kentucky, New York, and 

Washington—indicated that collectively over 70,000 individuals 

transitioned between Medicaid and exchange coverage in 2014.66

Specifically, the three states—all of which were SBE states that had 

expanded Medicaid—reported that about 73,000 individuals transitioned 

in 2014 (see table 1). These individuals accounted for between 

7.5 percent and 12.2 percent of exchange coverage enrollment and less 

than 1 percent of Medicaid enrollment in those states.67 Data from the 

three states also indicated that most individuals transitioned to or from 

subsidized exchange coverage, rather than unsubsidized exchange 

coverage. While states were not able to provide data on the 

demographics of those transitioning, New York officials told us that it was 

likely mostly adults transitioning, because children have access to CHIP. 

In New York, CHIP covers children up to 400 percent of FPL—the same

income limit as that set for the premium tax credit—compared with the 

Medicaid limit for adults of 133 percent of FPL.68 While individuals 

transitioning accounted for a relatively small percentage of enrollment, the 

total number of individuals transitioning across states could be significant. 

Out of the 25 states that had expanded Medicaid as of January 2014, we 

66Data provided for the Medicaid population varied by state. Washington provided data for 

its entire Medicaid population, and Kentucky and New York provided data for individuals 

who enrolled in Medicaid through the states’ exchanges and were determined eligible for 

Medicaid by PPACA’s new uniform method for calculating income—modified adjusted 

gross income.

67To analyze the proportions of Medicaid and exchange enrollment that these individuals 

accounted for, we used total Medicaid and exchange enrollment counts provided by the 

states. The enrollment counts provided by Kentucky reflect the number of individuals that 

had ever enrolled in the applicable program in 2014. The enrollment counts provided by 

New York and Washington reflect enrollment as of, respectively, November and 

December 2014.

The data from the three states likely do not reflect the total number of individuals who 

experienced eligibility changes during 2014 that could have resulted in a transition 

between Medicaid and exchange coverage. Some individuals might have experienced 

eligibility changes but not reported them, meaning that they maintained their current type 

of coverage even though they were eligible for the other. Other individuals experiencing 

eligibility changes may have been disenrolled from one type of coverage but failed to 

enroll in the other, becoming uninsured instead.

68The 24 other states that expanded Medicaid as of January 2014 generally had income 

eligibility standards that were higher for children (either in Medicaid or CHIP) than for 

adults as of October 2014. However, none were as high as New York’s. Thus, there may 

be a greater likelihood of children transitioning between coverage types in states other 

than New York though the likelihood may still be less than that of adults.

Limited Data Show 

Small Percentages of 

Enrollees 

Transitioned between 

Coverage Types, but 

Transitions May 

Increase in the Future

Page 30 GAO-16-73 Medicaid and Exchanges

 
estimate that Kentucky, New York, and Washington accounted for 

22.9 percent of total Medicaid and CHIP enrollment and 18.3 percent of 

total exchange enrollment in 2014.69

Table 1: Number of Individuals Transitioning between Medicaid and Exchange 

Coverage, Selected States, 2014

State

Medicaid to 

exchange

Exchange to 

Medicaid

Total individuals 

transitioning

Kentuckya 5,988 7,429 13,417

New Yorkb NPc 26,758 26,758

Washington 7,097 25,709 32,806

Total 13,085 59,896 72,981

Legend: NP = not provided.

Source: GAO summary of data from selected states. I GAO-16-73

a

Kentucky data were limited to those who enrolled in Medicaid through the state’s exchange and were 

determined eligible for Medicaid by PPACA’s new uniform method for calculating income—modified 

adjusted gross income.

b

New York provided data through November 15, 2014. The data do not reflect any changes that may 

have occurred during the annual redetermination of eligibility for exchange coverage. Data were also 

limited to those who enrolled in Medicaid through the state’s exchange and the portion of the 

population whose eligibility is determined using modified adjusted gross income.

c

New York did not track movement from Medicaid to exchange coverage in 2014, but planned to do 

so in 2015.

The data from the three states may understate the extent to which 

transitions between Medicaid and exchange coverage could occur in 

those states in future years. In particular, the number of individuals 

moving from Medicaid to exchange coverage may be greater in future 

years than in 2014. Individuals newly eligible for and enrolled in Medicaid 

in early 2014 would not have gone through their first annual 

redetermination of Medicaid eligibility, and officials in one state told us 

that they did not expect to see a lot of movement from Medicaid to

exchange coverage until those redeterminations began. In addition, the 

number of individuals moving from exchange coverage to Medicaid in the 

three states may be greater in future years. Annual redeterminations of 

eligibility for subsidized exchange coverage are to occur during the 

69To estimate total 2014 enrollment in states that expanded Medicaid, we used Medicaid 

and CHIP enrollment data as of March 2014. The exchange enrollment data represent the 

number of individuals that selected a plan for 2014 coverage through the exchange from 

October 1, 2013 through March 31, 2014, as well as reported special enrollment period 

activity through April 19, 2014.

Page 31 GAO-16-73 Medicaid and Exchanges

 
annual open enrollment period for exchange coverage, which may extend 

from the end of a calendar year through the beginning of the following 

calendar year.70 As 2014 was the first year of exchange coverage, the 

data for this year reflected, at the maximum, only changes resulting from 

annual redeterminations of eligibility during the end of the calendar year—

the beginning of the open enrollment period for 2015 exchange 

coverage.71

Where selected SBE states were not able to provide data on transitions 

between Medicaid and exchange coverage, officials told us they were 

developing or improving the functionality to track those data.

• In Colorado, which was not tracking transitions in 2014, officials told 

us that tracking transitions was considered a high priority. Officials 

told us that, as of July 2015, the state had made changes to its IT 

system that would provide the functionality to track transitions and 

they anticipated being able to do so later that year.

• In New York, officials reported being in the process of developing the 

functionality to track transitions from Medicaid to exchange coverage, 

and, in July 2015, the officials told us that they had recently started 

tracking these transitions.

• In Washington, a state already tracking transitions, officials told us 

that, as of July 2015, they had a project underway to begin looking at 

the demographics of those transitioning, including age and gender.

Selected states and CMS could not provide data on the extent to which 

individuals are transitioning between Medicaid and exchange coverage in 

FFE states. Officials from all four of our selected FFE states told us that 

the state did not have access to exchange enrollment information, and 

therefore the state was not able to provide data on transitions between 

Medicaid and exchange coverage. Similarly, as of July 2015, CMS could 

not provide data on transitions between Medicaid and exchange coverage 

in FFE states. CMS officials told us that the FFE and state Medicaid IT 

70For example, for 2015 coverage, open enrollment extended from November 15, 2014, to 

February 15, 2015.

71The data from Kentucky and Washington included transitions that occurred through the 

end of December 2014—a portion of the open enrollment period for 2015 exchange 

coverage. The data from New York did not include any of the transitions that may have 

occurred due to annual redeterminations.

Page 32 GAO-16-73 Medicaid and Exchanges

 
systems are not integrated in a way that would allow for real-time tracking 

of transitions.72 Additionally, though CMS has access to both exchange 

and Medicaid enrollment data for FFE states, officials told us that, as of 

July 2015, they could not use those data to determine the number of 

individuals transitioning retrospectively. Officials explained that, for 

example, there was no single, unique identifier for an individual between 

the data sets, making it difficult to match people between the two data 

sets. CMS officials told us that, as of May 2015, representatives from 

CMS as well as from the Office of the Assistant Secretary for Planning 

and Evaluation had been working for about a year on a methodology for 

examining transitions. Officials said these efforts have primarily focused 

on analyzing transitions in SBE states, but that the findings may inform 

how to perform such an analysis for FFE states.

Information from our selected states and CMS indicated that most states 

with Medicaid managed care had one or more Medicaid issuers that also 

offered coverage through the state’s exchange. Seven out of our 8 

selected states—all but Iowa—reported having at least 1 issuer offering 

both Medicaid and exchange coverage in the state in 2014, ranging from 

2 to 13 issuers.73 These results are consistent with an analysis completed 

by CMS that indicated, in the 40 states with Medicaid managed care, the 

majority—33—had 1 or more issuers offering both Medicaid and 

exchange coverage in 2014.74 CMS did not identify any issuers offering 

both types of coverage in the remaining 7 states.

72These CMS officials noted that, when developing the FFE IT systems, it was not feasible 

to integrate them with state Medicaid IT systems in this way, in part because it would 

require ongoing FFE system changes to adjust to any relevant changes in the 34 FFE 

states’ Medicaid policies and IT systems.

73Iowa had only one issuer that offered comprehensive, risk-based Medicaid managed 

care, and this issuer did not offer exchange plans. According to state officials, Medicaid 

managed care is relatively small in the state, with approximately 89 percent of Medicaid 

beneficiaries enrolled in fee-for-service as of January 2015. In addition, the state uses 

Medicaid funds as premium assistance to purchase exchange coverage for certain newly 

eligible Medicaid beneficiaries under a demonstration under section 1115 of the Social 

Security Act.

74CMS considered issuers owned by the same parent company to be equivalent for the 

purpose of matching issuers across Medicaid and exchange coverage.

At Least One Issuer 

Offered Both 

Coverage Types in 

Most States, but 

Many Individuals 

Transitioning May Not 

Stay with Their Issuer

Page 33 GAO-16-73 Medicaid and Exchanges

 
However, information from our selected states also indicated that in some 

states, the majority of Medicaid and exchange enrollees may not be 

enrolled with issuers offering both types of coverage. In the 7 selected 

states with issuers offering both types of coverage, the issuers accounted 

for between 8 and 76 percent of Medicaid enrollment and 19 and 

74 percent of exchange enrollment where data were available from states 

(see table 2). The proportion of Medicaid enrollees in plans offered by 

issuers that also offer exchange coverage is affected by the proportion of 

Medicaid enrollees who participate in managed care in the state, as 

enrollees in fee-for-service Medicaid would not be enrolled with an issuer. 

For example, in Colorado, which had a relatively low percentage of 

Medicaid enrollees in plans offered by issuers also offering exchange 

coverage, the majority, or about two-thirds, of Medicaid enrollees were in 

fee-for-service as of February 2015 according to state officials.

Table 2: Issuer Participation and Share of Exchange and Medicaid Enrollment in Selected States in 2014

State

Number of issuers 

offering coverage in 

the individual 

exchange

Number of issuers 

offering Medicaid 

managed care

Number of issuers 

offering both 

coverage types

Percent of exchange 

enrollees in a plan 

offered by an issuer 

that also offered 

Medicaid coverage

Percent of Medicaid 

enrollees in a plan 

offered by an issuer 

that also offered 

exchange coverage

Colorado 10 5 2 19 8

Kentuckya 3 5 2 22 18

Arizonab 8 8 4 Not available 32

Texasc 11 19 10 Not available 42

Utah 6 4 2 Not available 55

Washington 8 5 3 19 59

New Yorkd 16 15 13 74 76

Iowa 4 1 0 Not applicable Not applicable

Source: GAO analysis of state and Centers for Medicare & Medicaid Services data. I GAO-16-73

Notes: Managed care refers to comprehensive, risk-based managed care. Information on individual 

exchange coverage excludes standalone dental plans offered through the exchanges. Except where 

otherwise noted, enrollment data are as of between August and December 2014.

a

Enrollment data from Kentucky reflect the number of individuals ever enrolled in Medicaid or 

exchange coverage, where applicable, in 2014. In addition, the Medicaid enrollment data from 

Kentucky include only those who enrolled in Medicaid through the state’s exchange and were 

determined eligible using modified adjusted gross income.

b

The information on issuer participation in Medicaid for Arizona excludes participation in the Arizona 

Long Term Care System, a managed care program for elderly individuals who are blind or disabled 

and in need of long term care.

c

The Medicaid enrollment data from Texas exclude Medicaid enrollees receiving partial benefits such 

as women’s health program services.

d

The Medicaid enrollment data from New York include only those who enrolled in Medicaid through 

the state’s exchange and were determined eligible using modified adjusted gross income.

Page 34 GAO-16-73 Medicaid and Exchanges
Additionally, not all individuals enrolled with issuers offering both types of 

coverage would be able to remain with their issuer when transitioning, 

due to differences in issuers’ service areas for their Medicaid and 

exchange coverage. For example, one of the two issuers that offered both 

types of coverage in Kentucky in 2014 offered Medicaid coverage 

statewide, but offered exchange coverage in just 15 of the 120 counties in 

the state, representing about 41 percent of the state’s population. The 

other issuer offered exchange coverage statewide and Medicaid 

coverage in 111 counties, representing about 76 percent of the 

population. In 7 counties, representing about 5 percent of the population, 

neither of the issuers offered both Medicaid and exchange coverage.

A larger proportion of individuals may have the opportunity to remain with

their issuer when transitioning between the coverage types in future 

years. In 2015, the total number of issuers offering both Medicaid and 

exchange coverage increased in 3 of our selected states.75 In addition, 

information from selected states indicated that in some cases, issuers 

that already offered both Medicaid and exchange coverage in some 

counties within a state began to do so in additional counties in 2015. 

Evidence from selected issuers also suggests that a growing number of 

individuals may have the opportunity to remain with their issuer moving 

forward—for example, representatives from one issuer reported that the 

number of states in which the issuer offered both types of coverage grew 

from 3 states in 2014 to 16 states in 2015. Representatives from another 

issuer told us that, given the complexities of offering two new types of 

coverage, it had so far chosen not to offer exchange coverage in some 

states in which it was newly participating in Medicaid but anticipated 

beginning to offer exchange coverage in those states in future years.

While a growing number of individuals may have the opportunity to 

remain with their issuer when transitioning between the coverage types, 

the extent to which individuals will choose to do so will likely depend on a 

number of factors, including the following:

• Desire to change plans. Studies suggest that some individuals are 

likely to change plans—which may be offered by different issuers—

75In Kentucky and Washington, there was 1 additional issuer offering both, while in 

Arizona there were 2 additional issuers offering both. The total number of issuers offering 

both types of coverage remained constant in the remaining 5 selected states.

Page 35 GAO-16-73 Medicaid and Exchanges

 
when provided the option to do so.76 This change may be positive, 

such as in cases where the new plan better addresses the individual’s 

health care needs.

• Cost of exchange plans. Individuals may be less likely to remain 

with their issuer when transitioning from Medicaid to the exchange if 

issuers offering both types of coverage are unable to offer competitive 

premiums for their exchange plans. Representatives from two 

selected issuers that offered both types of coverage reported that they 

had relatively low exchange market share in 2014 most likely because 

they were unable to offer competitive premiums, but said they were 

able to offer lower premiums in 2015 and have seen or expected to 

see increased enrollment.

• Awareness of issuer participation in both types of coverage.

Individuals transitioning between coverage types may not be aware 

that their issuer also offers plans in the new coverage type. For 

example, in some states Medicaid managed care marketing 

restrictions may prohibit issuers from marketing their exchange plans 

to existing Medicaid enrollees.77 For instance, representatives from 

one selected issuer reported piloting an outreach program in some 

states to inform Medicaid members whose coverage was terminating 

about the issuer’s exchange plans, but noted that the issuer was not 

permitted to operate this program in at least one state. In addition, 

issuers may operate under different names in Medicaid and for their 

exchange coverage, which could make it difficult for individuals to 

identify whether their issuer operates in the new coverage type.

• Auto-assignment in Medicaid managed care. Many states with 

managed care auto-assign individuals to issuers either at the initial 

eligibility determination or if an individual does not select his or her 

76For example, according to HHS, 29 percent of individuals who were enrolled in 

exchange coverage in 2014 and reenrolled for 2015 exchange coverage between 

November 2014 and February 2015, switched plans between the coverage years. See 

Department of Health and Human Services, Office of the Assistant Secretary for Planning 

and Evaluation, Health Insurance Marketplaces 2015 Open Enrollment Period: March 

Enrollment Report (Washington, D. C.: Mar. 10, 2015). According to another study, 

7.5 percent of nonelderly individuals with employer-sponsored coverage switched plans 

for reasons other than a job change in 2010—generally because of a change in offered 

benefits. See National Institute for Health Care Reform, Few Americans Switch Employer 

Health Plans for Better Quality, Lower Costs (Washington, D.C.: 2013).

77Federal regulations allow issuers to provide information to enrollees about exchange 

plans they may enroll in if permitted by the state.

Page 36 GAO-16-73 Medicaid and Exchanges

 
own plan within a certain time period.78 While such individuals may 

have the opportunity to change their Medicaid issuer after autoassignment, they may choose not to do so or may not be aware of this 

ability, which may affect their likelihood of remaining with their issuer 

when transitioning from exchange coverage.

Finally, for individuals transitioning between Medicaid and exchange 

coverage, the benefits of remaining with the same issuer for continuity of 

care are uncertain. Representatives of some selected issuers reported 

that covered benefits, cost-sharing, and drug formularies for their 

Medicaid and exchange plans differed to some extent due in part to 

differences in state and federal requirements for Medicaid and exchange 

coverage, with Medicaid requiring coverage of additional services and 

lower cost-sharing as compared to exchange coverage.79 These 

differences will likely persist regardless of whether individuals remain with 

the same issuer. However, officials from some selected states told us that 

remaining with the same issuer when transitioning may allow individuals 

to keep their health care providers, which could lead to improved 

continuity of care. There is some evidence to suggest that certain issuers 

offering both Medicaid and exchange coverage offer similar provider 

networks. Specifically, representatives of three selected issuers that 

traditionally offered Medicaid coverage reported leveraging their existing 

Medicaid provider networks when expanding to the exchange, and two of 

the issuers noted that most providers elected to participate. At the same 

time, some officials told us that provider networks for issuers offering both 

78States may use different methodologies for auto-assignment and may take into account 

factors such as individuals’ provider relationships, enrollment of family members, and the 

distribution of Medicaid enrollment among issuers. In May 2015, CMS issued a proposed 

rule that, if finalized, would modify requirements for auto-assignment in managed care 

enrollment processes. For example, under this proposed rule, states would be required to 

provide at least a 14-day period for enrollees to actively select their managed care issuer 

prior to auto-assignment going into effect.

79For example, while both Medicaid and exchange plans must cover certain basic 

benefits, such as hospital and laboratory services, Medicaid mandates coverage of certain 

additional services that exchange plans are not required to cover, such as Early and 

Periodic Screening, Diagnostic, and Treatment services for children, and transportation to 

medical appointments. In addition, federal Medicaid regulations limit cost-sharing to 

nominal amounts—in fiscal year 2013, the maximum nominal copayment for enrollees in 

Medicaid managed care was $4. However, according to one study, the average 

copayment for primary care office visits in calendar year 2015 ranged from $14 to $23 for 

individuals receiving cost-sharing reductions in the 34 FFE states as well as the 3 SBE 

states using the FFE IT systems. See G. Claxton and N. Panchal, Cost-Sharing Subsidies 

in Federal Marketplace Plans (Menlo Park, Calif.: Kaiser Family Foundation, 2015).

Page 37 GAO-16-73 Medicaid and Exchanges

 
types of coverage could differ. Whether individuals transitioning between 

the coverage types are able to keep their providers may depend in part 

on the specific exchange plan they choose, as issuers often offer multiple 

plan options on the exchange, some of which may have more similar 

provider networks to Medicaid than others.

Through the creation of subsidized exchange coverage and the state 

option to expand Medicaid eligibility under PPACA, many low-income 

individuals have a new pathway to maintain health coverage despite 

changes in income or other factors. Federal and state Medicaid and 

exchange policies and procedures influence the extent to which 

individuals are able to seamlessly transition between coverage types, 

including whether they are able to transition without a gap in coverage 

and whether they end up enrolled in both Medicaid and subsidized 

exchange coverage for extended periods of time. To the extent coverage 

gaps and duplicate coverage occur, individuals may decide to forgo 

needed care or may unnecessarily be paying any remaining share of 

exchange premiums after APTC when they should only be enrolled in 

Medicaid. Additionally, duplicate coverage could mean that the federal 

government is paying for both Medicaid and subsidized exchange 

coverage for some individuals.

SBE states are better positioned to minimize the potential for coverage 

gaps and duplicate coverage to the extent they are able to share 

enrollment data across Medicaid and the exchange as well as build 

controls into their IT systems to prevent duplicate coverage. For FFE 

states as well as SBE states using the FFE IT systems, CMS 

implemented several policies and procedures and has additional controls 

planned that represent positive steps towards minimizing coverage gaps 

and duplicate coverage. However, as per federal internal control 

standards, those plans do not sufficiently address the risks. In particular, 

CMS does not currently track and has no plans to track the timeliness of 

account transfers from states, which could increase the potential that 

individuals transitioning from Medicaid to the exchange will experience 

coverage gaps. Additionally, CMS has not determined the frequency of its 

planned checks for duplicate coverage, a factor that will be critical to their 

effectiveness, and does not have a plan—including target levels of 

duplicate coverage the agency deems acceptable—for monitoring the 

checks and other procedures. Despite the addition of the checks, 

vulnerabilities related to preventing duplicate coverage are likely to 

persist, as, for example, the automated check for Medicaid during 

eligibility determinations for subsidized coverage will continue to have 

Conclusions

Page 38 GAO-16-73 Medicaid and Exchanges
limitations. Thus, given the potential financial implications of duplicate 

coverage and if the checks identify that it is occurring at a significant rate, 

additional steps could protect the federal government and individuals from 

unnecessary and duplicative expenditures.

Our findings indicate that a relatively small proportion of Medicaid and 

exchange enrollees may be transitioning between coverage types, and 

thus the incidence of coverage gaps and duplicate coverage could be 

limited. However, to the extent that transitions increase in the future—

particularly if exchange enrollment continues to grow and if additional 

states expand Medicaid—improvements to CMS controls to minimize 

coverage gaps and duplicate coverage for these individuals will be 

increasingly important.

To better minimize the risk of coverage gaps and duplicate coverage for 

individuals transitioning between Medicaid and the exchange in FFE 

states, we recommend that the Administrator of CMS take the following 

three actions:

1. Routinely monitor the timeliness of account transfers from state 

Medicaid programs to CMS and identify alternative procedures if near 

real time transfers are not feasible in a state.

2. Establish a schedule for regular checks for duplicate coverage and 

ensure that the checks are carried out according to schedule.

3. Develop a plan, including thresholds for the level of duplicate 

coverage it deems acceptable, to routinely monitor the effectiveness 

of the checks and other planned procedures to prevent and detect 

duplicate coverage, and take additional actions as appropriate.

We provided a draft of this report to HHS and IRS for comment. In its 

written comments—reproduced in appendix II—HHS concurred with our 

recommendations. With regard to our first recommendation, HHS 

commented that HHS monitors and reviews account transfers through 

standard weekly reporting and that, if there are concerns with the 

frequency of transfers, HHS resolves any issues with the states. 

However, knowing the frequency of account transfers—that is, how often 

the state is sending them electronically to HHS—may not provide enough 

information without HHS also having information on the timeliness of 

states' transfers—that is, the amount of time it takes the state to transfer 

an individual's account after making a determination that the individual is 

Recommendations for 

Executive Action

Agency Comments

Page 39 GAO-16-73 Medicaid and Exchanges
no longer eligible for Medicaid. Thus, HHS using its weekly reporting 

process has the potential to meet our recommendation if the process 

monitors not only the frequency of transfers but also the timeliness of 

transfers. With regard to our other recommendations, HHS stated that its 

first check for duplicate coverage was underway in August 2015, and that 

HHS will analyze the rate of duplicate coverage identified and gather 

input from states on the level of effort needed to conduct the check in 

order to establish the frequency of checks going forward. HHS also stated 

that it will monitor the rate of duplicate coverage identified in periodic 

checks. Finally, HHS stated that it is working to implement additional 

internal controls to reduce duplicate coverage, including automatically 

ending subsidized exchange coverage for individuals also found to have 

been determined eligible for Medicaid or CHIP who have not ended this 

coverage themselves. HHS also provided technical comments, which we 

incorporated as appropriate. IRS had no comments on the draft report.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Health 

and Human Services and other interested parties. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please 

contact Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov or 

John E. Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made key contributions to 

this report are listed in appendix III.

Carolyn L. Yocom

Director, Health Care

John E. Dicken

Director, Health Care

Page 40 GAO-16-73 Medicaid and Exchanges
Appendix I: Information on States Selected for 

Our Review

State Exchange typea

Total 

Medicaid 

enrollmentb

Percent of 

national 

Medicaid 

enrollmentc

Total 

individual 

exchange 

enrollmentd

Percent of 

national 

individual 

exchange 

enrollmentd

States that expanded Medicaide

Arizona Federally facilitated 1,475, 310 2.7% 120,071 1.5%

Colorado State-based 976,972 1.8 125,402 1.6

Iowa Federally facilitated 523,281 1.0 29,163 0.4

Kentucky State-based 1,060,566 2.0 82,747 1.0

New York State-based 5,672,421 10.5 370,451 4.6

Washingtonf State-based 1,545,269 2.9 163,207 2.0

States that did not expand Medicaide

Texas Federally facilitated 3,965,101 7.3 733,757 9.1

Utah Federally facilitated 296,528 0.5 84,601 1.1

Total for states that expanded and did not expand Medicaid 15,515,448 28.7 1,709,399 21.3

Source: GAO analysis of Department of Health and Human Services data. I GAO-16-73

a

Refers to the state’s individual exchange type for coverage year 2014.

b

Refers to Medicaid enrollment as of March 2014.

c

To calculate these percentages, we used total Medicaid enrollment counts reported by states to the 

Department of Health and Human Services as of March 2014. These data were not available for three 

states—California, the District of Columbia, and North Dakota. With the exception of these states, 

total national Medicaid enrollment as of March 2014 was 54,055,856. With the addition of these 

states’ enrollment data, the percentages in this column would be smaller.

d

Except where otherwise noted, refers to the number of individuals who selected an individual 

exchange plan during the initial open enrollment period between October 1, 2013, and March 31,

2014, as well as reported special enrollment period activity through April 19, 2014. Data are as of 

May 1, 2014. Total national individual exchange enrollment—in other words, the total number of 

individuals who selected an individual exchange plan during this time period—was 8,019,763.

e

Data are as of March 2014.

f

The individual exchange enrollment data for Washington include only the number of individuals who 

selected a plan and paid for coverage.

Appendix I: Information on States Selected 

for Our Review

Page 41 GAO-16-73 Medicaid and Exchanges
Appendix II: Comments from the Department Appendix II: Comments from the Departmen of Health and Human Services t 

of Health and Human Services

Page 42 GAO-16-73 Medicaid and Exchanges
Appendix II: Comments from the Department 

of Health and Human Services

Page 43 GAO-16-73 Medicaid and Exchanges
Appendix II: Comments from the Department 

of Health and Human Services

Page 44 GAO-16-73 Medicaid and Exchanges
Appendix II: Comments from the Department 

of Health and Human Services

Page 45 GAO-16-73 Medicaid and Exchanges
Appendix III: GAO Contacts and Staff 

Acknowledgments

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov

John E. Dicken, (202) 512-7114 or dickenj@gao.gov

In addition to the contacts named above, Susan Barnidge, Assistant 

Director; Priyanka Sethi Bansal; Keith Haddock; Laurie Pachter; 

Vikki Porter; Rachel Svoboda; and Emily Wilson made key contributions 

to this report.

Appendix III: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Staff 

Acknowledgments

(291243) Page 46 GAO-16-73 Medicaid and Exchanges
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