States may consider adopting ELE primarily because of its promise of expanding coverage of eligible children, or as a way to qualify for CHIPRA performance bonus funds. However, ELE may have additional, perhaps less well recognized, benefits for states, most of which center on administrative efficiencies and the savings they may create.
First, ELE can increase the percentage of program expenditures spent on benefits, rather than on administration. By relying on determinations that other programs have already made, Medicaid and CHIP can reduce the administrative costs of enrollment or renewal. Although states will likely need to make expenditures to create the infrastructure and make policy decisions regarding ELE’s implementation, the end result can be an operationally more efficient system that can reduce ongoing administrative costs. In determining the impact of ELE on administrative efficiency, one must compare and assess start-up costs from ongoing savings resulting from ELE implementation.
ELE also holds significant promise for helping states do more with less. In much of the country, the worst state budget crises in decades have led to staff cutbacks and hiring freezes, shrinking the number of staff who take applications and determine eligibility, even as the ongoing economic downturn prolongs an elevated demand for services. Strategies like ELE, which can lower administrative costs of enrollment and renewal through the use of automated data matches (versus manual processing of forms), are particularly appealing to state officials with limited administrative resources.
Using ELE for renewal also could diminish churning (when children cycle on and off of public coverage, experiencing breaks in coverage) of eligible children in Medicaid and CHIP, which also could lead to administrative savings. Churning is a nontrivial problem among children eligible for public coverage: in 2008, a quarter of all uninsured children had been enrolled in Medicaid or CHIP the year before (Sommers 2010). Sommers (2005) also found that a state’s decision to implement a separate CHIP program raises by 45 percent the likelihood that eligible children lose coverage at renewal. Churning leads to real costs for families and states: children experience periods without coverage, despite their ongoing eligibility, and states incur costs to re-process eligibility for children already on their programs. These costs can be significant: studies of administrative changes in Washington state showed that reducing eligibility periods from 12 to 6 months increased administrative costs by $5 million, while, at the same time, enrollment fell by more than 30,000 children (Ku et al. 2009; Wachino and Weiss 2009). Moreover, because Medicaid and CHIP agencies can be Express Lane agencies, ELE could also ease transitions between the two programs at renewal, eliminating the churning sometimes triggered when family income changes.