Lesson from Illinois: Use of outside contractors to verify health care eligibility unlikely to deliver promised savings

Ben Horowitz
Apr 15, 2015

In 2012, Illinois policymakers authorized about $70 million to hire a private contractor to redetermine whether people enrolled in the state’s Medicaid health care coverage were still eligible. After predicting $350 million in savings for FY 2013, the state saved only $2.6 million during that year. The effort also resulted in lost health care coverage for thousands of people who were likely eligible.

Despite this cautionary tale, two bills being considered in Minnesota this session — House File 1460 and House File 1936 — would pay a contractor to re-examine the eligibility of participants in Medical Assistance and MinnesotaCare. A deeper dive into the “Illinois approach” reveals this effort is likely to cause many Minnesotans to wrongfully lose their health care coverage while also falling well short of the savings that proponents hope to achieve.

In Illinois, the contractor cross-referenced data on Medicaid enrollees to prioritize cases for review. Almost all of this data — aside from a credit check — came from the state. Paying a contractor millions of dollars to use Minnesota’s own data doesn’t seem like the wisest use of state resources.

Once Illinois’ contractor and state workers sorted through their caseloads, they sent some households requests for more information. Benefits would be discontinued if those households didn’t respond, or if they responded with information confirming their ineligibility.

The State of Illinois estimates that the majority of households losing coverage had their coverage cancelled because of a paperwork issue, rather than because of an actual problem with their eligibility. Three percentages drive this home:

  • 84 percent of cancellations from February to December 2014 occurred because households did not respond to the request for more information.
  • 89 percent of households whose health care coverage was cancelled due to a non-response were “likely eligible,” according to a report by the Illinois Department of Healthcare and Family Services.
  • So far, more than a third of households whose health care coverage was cancelled in FY 2015 had their coverage reinstated within three months.

In short, Illinois spent tens of millions of dollars on a private contractor who used already-available information to cancel health care coverage for likely-eligible people. Minnesota should learn from their example and invest our resources more wisely.

-Ben Horowitz