What we did over at OWGC is if you downgrade your skill you have to go back to the challenge tour and set a new handicap
Having players set a new handicap because of a downgrade doesn't always achieve anything, as if said player is sneaky enough they will play their 20 rounds very poorly to get the best possible handicap and then in their first event completely lap the field because they have started off with a totally false handicap. Then dependant on the handicapping system in place, it could take 2 or 3 further events for the handicap to get to where it really should be.
Sadly, there are those who do stoop to these levels just to make sure they win at least once.