On October 26, 2017, the Centers for Medicare and Medicaid Services (CMS) approved an amendment to Iowa’s Section 1115 demonstration waiver eliminating 3-month retroactive coverage for nearly all new Medicaid applicants as of November 1, 2017.1 Populations affected by Iowa’s waiver include low-income parents, children over age 1, Affordable Care Act (ACA) expansion adults, seniors, and people with disabilities. Retroactive coverage waivers have been approved in a limited number of other states with certain conditions. This issue brief answers key questions about Medicaid retroactive coverage, describes Iowa’s recent waiver amendment, considers the policy implications of retroactive coverage waivers, and identifies issues to watch.
What is Medicaid retroactive coverage and why is it part of Medicaid?
Unlike private insurance, Medicaid covers vulnerable populations, such as seniors, people with disabilities, low-income children and their parents, and other low-income adults. Medicaid is a safety net program that provides services that private insurance typically does not, such as long-term care, and protects enrollees from unpaid medical bills that they cannot afford. It also ensures that providers are paid for services they offer to Medicaid-eligible people and helps encourage providers to participate in the program. Retroactive coverage is one of the long-standing safeguards built into the program for low-income Medicaid beneficiaries and their healthcare providers. Federal law directs state Medicaid programs to cover (and provides federal matching funds for) medical bills incurred up to 3 months prior to a beneficiary’s application date.2 To qualify for retroactive coverage, a Medicaid beneficiary must have been eligible for coverage during the 3 months prior to application when the bill was incurred, and the services must be those that Medicaid covers.
Some people may not become eligible for Medicaid until after they experience a traumatic event, such as a stroke that requires hospitalization and ongoing long-term care needs or a motorcycle accident resulting in a traumatic brain injury. In addition, many people mistakenly think that Medicare covers long-term care and often do not learn about Medicaid until their health deteriorates to the point that they seek a nursing home placement or other long-term care services; these events often are precipitated by a crisis, such as a fall, that cause seniors and their families to seek out services and supports. When sudden health care needs arise, the initial focus often is on stabilizing the person’s medical condition. If a traumatic event occurs toward the end of a calendar month, it may take several days or weeks for the patient and their family and providers to navigate complex medical issues before they turn to considering payment, including Medicaid eligibility. During this time, sizeable medical bills can accrue. Retroactive coverage protects patients and providers by ensuring that medical bills are paid even if a Medicaid application is not filed until the calendar month following a traumatic event.
Federal Medicaid law allows some providers, like hospitals, to determine certain people “presumptively eligible” for Medicaid. Presumptive eligibility allows providers to offer (and get reimbursed for) needed health services right away to adults and children who appear to be eligible for Medicaid based on their low incomes, while a full Medicaid application is pending. However, presumptive eligibility is not available for seniors and people with disabilities who may have long-term care needs.