New Medicaid barrier: Waivers ending retrospective eligibility shift costs to providers, patients

Last year, Jackson Memorial Hospital in Miami admitted an uninsured, low-income patient who stayed in the hospital for 86 days and ran up total charges of more than $1 million.

It took the public hospital's staff 65 days to complete a Medicaid application for the patient. Once it was approved, the Florida Medicaid agency covered bills for the previous 90 days, as per federal Medicaid policy in effect across the country since 1972. Jackson received a payment of $82,000, based on the state's limit of 45 covered hospital days per year.

But on Feb. 1, Florida ended retrospective Medicaid eligibility under a waiver granted by the CMS in November and effective through June, which likely will be extended. Now it will only cover claims back to the first day of the month in which an application is filed. The state projects this will save it and the federal government $100 million a year. The Trump administration so far has granted similar waivers to five other states.

If the waiver had been in effect last year, Jackson would have eaten that patient's entire bill. It estimates the new policy will cost the hospital at least $4 million a year in uncompensated care, and likely far more.

“We get trauma cases where we can't identify the patient or get documentation for weeks,” said Myriam Torres, Jackson's vice president of revenue cycle. “This will save Medicaid dollars at providers' and patients' expense.”

Over the past two years, despite strong objections from hospitals and other provider groups, the CMS has granted waivers of 90-day retrospective eligibility to Arizona, Arkansas, Florida, Iowa and Kentucky. Some were part of broader Medicaid Section 1115 demonstrations of work requirements. Maine also received a waiver but its new Democratic governor announced she won't implement it. The CMS is considering similar waiver requests from Ohio and other states.

In its approval letters, the CMS argued that demonstrations ending 90-day retrospective eligibility will test whether that gives beneficiaries an incentive to enroll in Medicaid before they need healthcare services, so they can receive preventive services and stay healthier. It also says the change will facilitate a smoother transition of beneficiaries into commercial health plans, which don't offer retroactive coverage.

The CMS is requiring states to develop outreach and education strategies to encourage providers and beneficiaries to submit Medicaid applications as early as possible, though providers say they haven't seen any significant new state activity there.

A CMS spokesman said that as in all Section 1115 demonstration waivers, the agency is requiring states to monitor and regularly report the outcomes and financial impact.

But experts say there's no evidence that eliminating retrospective eligibility encourages Medicaid-eligible people to sign up earlier, and there are plenty of reasons why that hypothesis is implausible.

“Many people who aren't enrolled are not aware they are eligible or they have difficulty with the enrollment process,” said Dr. Benjamin Sommers, an associate professor of health policy and economics at Harvard University. “The notion that most people will sign up by getting rid of retrospective eligibility is unlikely. They typically do not even understand it.”

Critics say eliminating retrospective eligibility is one more administrative barrier the Trump administration has erected to make Medicaid and other public benefits harder to access. These include work and reporting requirements, premium payments, healthy behavior incentives, benefit lockouts, and proposed penalties for legal immigrants who use public programs. States like Arkansas that have added new hurdles have seen sharp drops in Medicaid enrollment.

“Shortening the (retrospective eligibility) window gives people less time to figure out they'd be eligible,” said Pamela Herd, a public policy professor at Georgetown University, who calls that form of administrative burden a learning cost. “Republicans have employed these types of changes to reduce use of social welfare programs.”

Under previous administrations, Delaware, Indiana, Maryland, Massachusetts, New Hampshire and Tennessee received waivers of the federal requirement for retrospective eligibility, typically as part of coverage expansions. In contrast, the Trump administration's waivers have been part of programs to restrict coverage.

Most of these waivers retain retroactive coverage for pregnant women, infants, disabled people and those in nursing homes. Florida's waiver, however, excludes such coverage for the nursing home population.

Herd and other experts say that if the goal is to get people to enroll as soon as they are eligible, there are proven ways to achieve that, such as streamlining the enrollment process and doing more aggressive outreach. The Trump administration has sharply cut funding for enrollment education and assistance.

On the other hand, if the goal is to reduce federal and state spending on Medicaid and shift costs to providers and patients, eliminating retroactive eligibility likely is effective.

Actuarial analyses of Medicaid payments have shown that about 5% of Medicaid payments occur during the retrospective eligibility period. Ending retrospective coverage would reduce Medicaid outlays by an estimated $13.3 billion from 2017 to 2026, according to the Commonwealth Fund.

In 2016, Indiana reported that 14% of beneficiaries to whom the waiver applied ran up significant out-of-pocket medical expenses as a result, averaging more than $1,500 per person. Sixteen percent of providers said they saw charity cases and bad debt increase as a result of the policy.

“If this is really an experiment, what is the policy goal other than to reduce program costs?” asked Joseph Antos, a conservative health policy analyst at the American Enterprise Institute. “Presumably this should have something to do with patient outcomes or efficiencies. I don't see the word efficiency in any of this. I see cut.”

Retrospective eligibility was built into federal Medicaid law early on as a safety net protection for very low-income people and their medical providers. It encourages providers to treat patients knowing they'll get paid and to help them sign up quickly for the program.

Another key rationale is that unlike in private insurance, many Medicaid beneficiaries “churn” on and off coverage due to changes in income and because states impose a demanding annual eligibility redetermination process. It's estimated that 25% or more of beneficiaries are at least temporarily disenrolled as a result of the redetermination process and other factors.

Many other people aren't even aware they are eligible. The Kaiser Family Foundation recently reported that 6.8 million uninsured adults and children were eligible for Medicaid but were uninsured in 2017.

All these factors leading to loss of coverage for eligible people makes retrospective eligibility an important backstop, patient advocates say.

But some state and federal officials long have complained about the cost of retroactive coverage, which generally can't be passed on to the private Medicaid plans that administer most state programs.

Tennessee received a waiver in 1994 as part of its major Medicaid coverage expansion program known as TennCare. Even though that program largely has been rolled back and the state has not expanded Medicaid under the Affordable Care Act, the elimination of 90-day retroactive coverage remains in place for nearly all beneficiaries.

That has led to many Medicaid-eligible people incurring large medical bills before their Medicaid applications are approved, with some facing lifetime debt, said Michele Johnson, executive director of the Tennessee Justice Center, which tries to help people clear up these bills.

The problem was exacerbated by a recent major computer glitch in the state's Medicaid enrollment system, which left thousands unable to file their annual enrollment redetermination applications online.

Before her Medicaid application was approved, one Memphis woman racked up $250,000 in bills resulting from her baby being born with severe health problems. “She said that was the hardest thing in her life—going home with a disabled child and being consigned to poverty for the rest of her life,” said Johnson, whose group helped with her case.

After a nine-month court fight, the woman finally got Tennessee's Medicaid program to pick up the entire bill.

Yet there has never been a study of the policy's impact in Tennessee. “It hasn't led people to sign up ahead of time,” Johnson said. “All these other policies make it almost impossible to sign up. If the state were interested in that, they would make the whole process less bureaucratic.”

In 2017, Iowa received a CMS waiver of the 90-day retrospective eligibility requirement, including for nursing home residents, despite warnings that nursing homes would refuse to admit people who were awaiting Medicaid eligibility. Last year, under pressure from nursing homes, the state Legislature restored retroactive coverage for that population.

Brent Willett, CEO of the Iowa Health Care Association, said it takes an average of 71 days to assemble complicated income and assets information, file the application, and receive approval for Medicaid nursing home coverage. Under the policy the state reversed, facilities only received payment back to the first day of the month when the application was filed, even though they may have admitted the resident many weeks earlier.

The association projected that policy would cost Iowa nursing homes $7 million in the first year. “It sounds nice that people should start the application process early and we agree, but it's not practical in practice,” Willett said. “If we are maintaining a system to ensure coverage for people who don't have assets for care, it makes no sense to penalize providers for providing that care. That policy wasn't cost containment, it was a cost shift to providers.”

As to the broader group of beneficiaries affected by Iowa's waiver, the Iowa Hospital Association is pushing to have 90-day retroactive eligibility reinstated this year. The policy hurts urban trauma centers that provide intensive care to people before an application can be completed, as well as rural hospitals that lack a profit cushion to absorb those unexpected costs, said Scott McIntyre, the association's vice president of communications.

The Legislature ordered it as a cost-containment measure, with the state projecting it would affect nearly 40,000 Iowans and save it and the feds $36.7 million a year. The CMS waiver required the state to provide outreach and education to the public to ensure that eligible people apply for Medicaid as soon as possible.

But McIntyre said the state has not ramped up enrollment outreach to mitigate the end of retrospective eligibility.

In addition, Iowa, which expanded Medicaid in 2014, has not conducted any review of the cost savings to the government or of the financial impact on providers and beneficiaries, according to a spokesman for the Iowa Department of Human Services. The CMS, he said, did not require the state to conduct such a report on the impact of eliminating retrospective eligibility. “We've made so much progress with Medicaid expansion to reduce uncompensated care, and this really undermines that progress,” McIntyre lamented.

There's already an effort to roll back the new retrospective eligibility waiver in Florida, which didn't expand Medicaid, so that it applies to nursing home residents and all other Medicaid eligibles except pregnant women and children.

It's basically impossible for many people who may need a nursing home placement to apply for Medicaid ahead of time because they're living in the community and don't qualify until they enter institutional care, explained Tom Parker, director of reimbursement for the Florida Health Care Association.

“I would think that undercuts the main argument for this policy,” he said.