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. Most Medicaid coverage and private health insurance coverage purchased through the exchanges qualifies as minimum essential coverage. 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. As of January 2014, 25 states had expanded their Medicaid programs, and an additional 4 states had expanded as of March 2015. 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). 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. 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. 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. In addition to the premium tax credit, PPACA provides for cost-sharing reductions to reduce out-of- pocket costs, such as deductibles and copayments, for eligible individuals with household incomes between 100 and 250 percent of the FPL. 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. 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. 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. 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. Outside of self-reported changes, eligibility for Medicaid must generally be redetermined every 12 months. 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. 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. 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. If individuals choose to end their exchange coverage, they must generally provide advance notice at least 14 days before the requested termination date. 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. 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. For individuals transitioning from exchange coverage to Medicaid during the year, this reconciliation could include repayment of APTC received after an individual was determined eligible for Medicaid. 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. 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. 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. 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. Individuals who experience gaps in coverage may decide to forgo necessary care rather than pay out-of- pocket, which could negatively affect health outcomes and result in sicker individuals enrolling in exchange coverage. 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. 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. 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. 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 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. 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. 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. 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 coverage. We recently found that states face challenges identifying whether Medicaid enrollees have other sources of coverage, which could include exchange coverage. 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. 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. 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. 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. 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. 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. At the 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. 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. 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. Officials also said that these integrated systems included system rules that help prevent duplicate coverage by not allowing an individual to be determined eligible for Medicaid and exchange subsidies simultaneously. 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. 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. According to federal internal control standards, in its responsibilities for administering and overseeing Medicaid and the exchanges, CMS should design and 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. 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. 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. 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 to have their accounts transferred, apply for exchange coverage, and select a plan to avoid a coverage gap (see fig. 2). 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. 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. Further, CMS did not perform a check for Medicaid coverage for the 1.96 million individuals who were auto-reenrolled in exchange coverage during 2015 open enrollment for FFE states. 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. 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. 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 respond within 30 days of being notified. 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; if quarterly, up to 4 months; and if biannually, up to 7 months (see fig. 3). 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. 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. 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. 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. 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 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. 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 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. 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. 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 systems are not integrated in a way that would allow for real-time tracking of transitions. 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. 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. CMS did not identify any issuers offering both types of coverage in the remaining 7 states. 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. 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. 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— when provided the option to do so. 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. 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 own plan within a certain time period. While such individuals may have the opportunity to change their Medicaid issuer after auto- assignment, 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. 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 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 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 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. 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.

Summary: 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. 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. 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.