Bridging the Gap: Private Sector Solutions to Medicaid Interstate Duplication

Introduction

On March 27, 2025, MSN republished a Wall Street Journal investigation titled "Taxpayers Spent Billions Covering the Same Medicaid Patients Twice," revealing a systemic failure in America's healthcare administration system. The investigation exposed how taxpayers have wasted billions of dollars through simultaneous Medicaid premium payments for the same individuals in different states. This duplicative spending represents one of the most significant yet least addressed inefficiencies in America's public healthcare system.

According to the investigation, "in a single three-month period, states paid twice for the healthcare of more than 400,000 people enrolled simultaneously in two states' Medicaid programs." The reporting found that over time, these duplicative payments have likely cost taxpayers billions of dollars, with managed care organizations collecting monthly premiums for patients who had already moved to different states and enrolled in new Medicaid programs.

The problem persists due to a fragmented system where states operate their Medicaid programs independently with minimal interstate coordination. As the article noted, "States are supposed to disenroll people when they move away or otherwise become ineligible, but the system frequently fails." Despite federal officials being aware of the issue for years, little has been done to address it. The investigation found that "officials at the Centers for Medicare and Medicaid Services have known about the duplicate coverage problem for years but haven't fixed it."

The problem is particularly acute when considering the scale of Medicaid in American healthcare. Medicaid serves approximately 80 million Americans, with federal and state governments spending over $800 billion annually on the program. With such massive expenditures, even small inefficiencies translate to substantial wasted taxpayer money. The investigation highlighted that "the duplicate enrollments mean that two states each pay an insurer to cover the same person, though only one can actually be providing care."

This essay explores how private sector innovation could address this systemic failure by developing business models, product architectures, and data systems that facilitate efficient interstate coordination while navigating the complex regulatory landscape of healthcare data sharing. The analysis will focus on practical, implementable solutions that could save billions in taxpayer funds by preventing duplicative Medicaid payments across state lines.

Part I: Understanding the Problem Space

The Magnitude and Mechanics of Medicaid Duplication

The Wall Street Journal investigation revealed the staggering scale of the problem: in a single three-month period, states paid twice for the healthcare of more than 400,000 people enrolled simultaneously in two states' Medicaid programs. Extrapolated over multiple years, this has likely resulted in billions of dollars in wasted taxpayer money. The reporting found that while the exact amount is difficult to calculate precisely due to varying premium rates across states and programs, "the duplicate enrollments mean that two states each pay an insurer to cover the same person, though only one can actually be providing care."

These duplicative payments occur primarily through Medicaid managed care programs, where states pay private insurers a fixed monthly premium for each enrollee, typically ranging from several hundred to over a thousand dollars per person per month. When Medicaid recipients move across state lines, they naturally apply for benefits in their new state of residence. However, the state they left often continues paying premiums for months or even years after the person has relocated, creating a situation where two different states are simultaneously paying for the same individual's coverage.

The mechanics of the problem are rooted in how Medicaid programs operate across state lines. When beneficiaries move, they typically apply for Medicaid in their new state but rarely formally disenroll from their previous state's program. The former state often has limited mechanisms to identify when beneficiaries have left their jurisdiction. As the investigation reported, "States are supposed to disenroll people when they move away or otherwise become ineligible, but the system frequently fails."

The investigation exposed several key failure points in the current system. First, there is no national database or real-time verification system that states can use to check if an applicant is already enrolled in another state's Medicaid program. States operate their Medicaid systems independently, with limited visibility into other states' enrollment data. This creates a fundamental information gap that enables duplicate enrollments to occur and persist.

Second, the financial incentives in the system don't encourage detection of these duplications. Managed care organizations receive capitated payments for each enrollee, giving them little financial incentive to report when enrollees have likely moved out of state. As the article noted, "Insurers have no immediate financial reason to tell states when they suspect people have moved, since they collect monthly premiums for each enrollee."

Third, privacy laws and regulations create both real and perceived barriers to interstate data sharing. Healthcare data is among the most protected categories of personal information, and concerns about violating privacy regulations often inhibit information exchange that could help identify duplicate enrollments.

Fourth, the technical infrastructure for Medicaid administration varies widely across states. State Medicaid Management Information Systems (MMIS) range from modern, interoperable platforms to legacy systems with limited capabilities for external data exchange. This technical heterogeneity makes coordination challenging even when legal and privacy barriers can be overcome.

The investigation highlighted specific examples that illustrate the real-world impact of these systemic failures. In one case, two neighboring states paid insurers to cover the same woman for more than two years, with each state paying around $700 a month—a total of approximately $33,600 in duplicate payments for a single beneficiary. In another instance, a man continued to be enrolled in one state's Medicaid program more than four years after he moved to another state and signed up there—potentially resulting in over $48,000 in wasteful spending for just one individual.

These examples demonstrate how the problem can persist for extended periods without detection, multiplied across hundreds of thousands of beneficiaries nationally. The result is billions in unnecessary taxpayer expenditures that could otherwise be directed to expanding services, improving care quality, or addressing other healthcare needs.

Furthermore, the investigation revealed that federal officials have known about the duplicate coverage problem for years but haven't implemented effective solutions. Despite the Centers for Medicare & Medicaid Services (CMS) being aware of the issue, they have not mandated or created a comprehensive approach to address it, leaving room for private sector intervention.

Regulatory and Privacy Landscape

Any solution to Medicaid duplication must navigate a complex regulatory environment. The Health Insurance Portability and Accountability Act (HIPAA) establishes strict guidelines for how protected health information (PHI) can be shared, requiring appropriate security measures, consent mechanisms, and data minimization practices. Additional federal regulations like 42 CFR Part 2, which provides enhanced protections for substance use disorder treatment records, further complicate information sharing for some Medicaid beneficiaries.

Beyond federal requirements, states often have their own privacy laws that can be more stringent. Laws like California's CCPA/CPRA, Virginia's CDPA, and similar regulations in other states create a patchwork of compliance requirements that any interstate solution must address. Many states require explicit consent from beneficiaries before their information can be shared across state lines, adding operational complexity to potential solutions.

Despite these challenges, the regulatory landscape also provides pathways forward. The 21st Century Cures Act promotes interoperability in healthcare information technology, and CMS has signaled support for solutions that reduce waste and improve program integrity. A successful private sector solution must balance compliance with innovation, treating regulatory requirements not as mere hurdles but as design parameters that can guide the development of trustworthy systems.

Part II: Potential Business Models