How CMS Can Restore Program Integrity to Medicaid by Eliminating Passive Redetermination Requirements
Key Findings
- Medicaid enrollment and spending have skyrocketed, and waste, fraud, and abuse along with it.
- More than one in five Medicaid payments is improper, and eligibility errors are the leading cause.
- The Obama and Biden administrations required states to increase their reliance on ex parte eligibility reviews, driving up errors and fraud.
- Ex parte redeterminations rely on old data and fail to capture recent changes to eligibility criteria.
- Eliminating passive redetermination requirements will help states catch payment errors and fraud before taxpayers pay the price.
Overview
In 2000, Medicaid primarily served the truly needy—children, seniors, and people with disabilities.1 At that time, there were only 35 million Americans enrolled in the program at a cost of $206 billion annually.2 By 2023, enrollment had nearly tripled, while costs soared to $964 billion in 2024.3 The rise in costs and enrollment have been driven by the expansion of Medicaid to able-bodied adults.4 Nearly 40 percent of all enrollees are able-bodied adults, and more than 35 percent of all Medicaid spending is on this group.5
As Medicaid enrollment and costs have surged, so have fraud and improper payments.6 More than one in five Medicaid dollars is spent improperly, and Medicaid has consistently been one of the top three federal programs for payment errors.7 Many of these errors are driven by bureaucrats intentionally creating rules that maximize enrollment at the expense of basic program integrity.8
Without any statutory authority, the Obama administration adopted regulations in 2012 to force states to redetermine eligibility for Medicaid enrollees who qualify based on Modified Adjusted Gross Income (MAGI) using a passive process in which agencies rely on existing data to determine eligibility instead of making contact with the enrollee.9 In 2024, the Biden administration finalized a rule that expanded this passive, or ex parte, redetermination requirement to more enrollees, and limited redeterminations to just once per year.10 Fortunately, the One Big Beautiful Bill Act suspended implementation of this Biden-era regulation.11
Congress and the Trump administration have made reducing improper payments and fraud a priority.12 CMS should continue these efforts and eliminate the requirement that states perform passive Medicaid redeterminations.
Medicaid is plagued by errors and fraud
Improper payments and fraud are a problem across the federal government. In 2025, improper payments reported by just a fraction of federal programs totaled $186 billion, and just five programs accounted for nearly three-fourths of the improper spending.13
Medicaid has been consistently riddled with improper payments and is second only to Medicare in the size and scope of its payment errors. In 2025, Medicaid errors were 20 percent of all federal improper payments at a cost of $37 billion.14
However, Medicaid’s problem with improper payments is even worse than it seems, with as many as 25 percent of payments made in error.15 CMS calculates improper payments through audits of states’ Medicaid spending, which are performed on a rolling, three-year cycle.16 The reported annual improper payment rate is an average of the previous three cycles of audits, meaning that two-thirds of the data is at least a year out of date.17 Additionally, these audits do not capture improper payments to managed care organizations at the provider level.18
In the years immediately following Medicaid expansion, the Obama administration suspended eligibility reviews, shielding the program from public scrutiny as it expanded to cover more able-bodied adults.19 The COVID-19 pandemic further disrupted the collection of improper payment data as states suspended Medicaid eligibility reviews.20 Eligibility errors drive high improper payment rates, causing 80 percent of all improper payments.21
Ex parte eligibility reviews cause errors and open the door to fraud
In 2012, the Obama administration issued regulations requiring states to use an ex parte redetermination process for Medicaid enrollees who qualify under the MAGI formula.22 Under this process, state agencies check existing data sources such as tax data, wage records, unemployment insurance databases, and Social Security Administration records to determine if an enrollee is still eligible for Medicaid rather than asking the enrollee directly for updated information on their income, employment, and household composition.23
Due to the push for passive redeterminations during the Obama and Biden administrations, states heavily rely on the ex parte redetermination process. Nearly 70 percent of all Medicaid redeterminations are made passively nationwide.24 In some states, the number is even higher. For example, in North Carolina, more than 99 percent of redeterminations use an ex parte process.25
This type of redetermination opens the door to fraud and errors. Data sources used for ex parte renewals do not capture real-time income changes and can be several months or years out of date.26-27 These data sources also fail to capture other factors that may influence eligibility, such as out-of-state moves or a change in household composition, and income from self-employment or rental properties.28-29
It comes as no surprise that eligibility errors are 75 percent higher for the population that states must perform simplified ex parte redeterminations than for other enrollees.30
Audits of specific states have also found that passive renewals are prone to errors. In Illinois, one in every three ex parte redeterminations had eligibility errors.31 More than 93 percent of these errors were due to inaccurate information being used in the renewal process and many of the errors were quickly caught after the agency made contact with the enrollee.32
A review of redeterminations in Ohio found that eligibility for more than 63,000 enrollees was incorrectly determined using passive renewals and pre-populated forms.33 In one highlighted example, the enrollee reported income higher than the Medicaid eligibility threshold to another agency, and a non-passive renewal process would have caught the error that the ex parte review did not.34
An audit of Louisiana’s Medicaid redeterminations found ex parte renewals relied on years-old data without verification that the information was still accurate.35 Passive renewals in Louisiana contributed to approximately $1 million in payments to people who had moved out of state and were no longer eligible.36
Eliminating ex parte redetermination requirements will stop improper payments and fraud
Congress has already suspended implementation of the Biden administration rule that required ex parte redeterminations for all Medicaid enrollees.37 However, states are still required to conduct passive redeterminations for enrollees who are eligible for Medicaid under the MAGI standard.
CMS should eliminate the requirement that enrollees who qualify based on the MAGI standard have their Medicaid eligibility renewed using an ex parte process. Allowing state agencies to have contact with enrollees during the redetermination process provides an opportunity for out-of-date information to be updated, or for enrollees to report marriages, deaths, job changes, moves out of state, or other changes that may affect eligibility.
Every dollar lost to payment errors is a dollar diverted from the truly needy. Ensuring that Medicaid redeterminations are made using accurate, timely eligibility information will help reduce improper payments and catch fraud.
The Bottom Line:
The Centers for Medicare & Medicaid Services (CMS) should eliminate ex parte Medicaid redetermination requirements.
Improper payments have been a serious concern in the Medicaid program for decades. Most improper payments are caused by eligibility errors, and more than $37 billion in payment errors occurred in 2025. Due to the passage of the One Big Beautiful Bill Act, states have a real incentive to crack down on Medicaid improper payments. CMS should eliminate the requirement that state agencies use a passive redetermination process. This will allow states to verify eligibility using real-time information and reduce the eligibility errors that drive improper payments.
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