Nixing retroactive coverage: The next big trend in state Medicaid waivers?

With Iowa’s newly amended waiver, coverage for Medicaid beneficiaries—with the exception of pregnant women and infants younger than 1 year old—will begin no earlier than the first day of the application month. (Getty/juststock)

Seizing on the Trump administration’s waiver-friendly stance, states are exploring a variety of ways to modify their Medicaid programs, from partial expansion to work requirements.

Now, a development in Iowa has given policy wonks another potential trend to watch when it comes to section 1115 waivers.

In late October, the Centers for Medicare & Medicaid Services approved the state’s application to modify its existing waiver—known as the “Iowa Health and Wellness Plan”—allowing it to eliminate retroactive coverage for nearly all new Medicaid applicants.

Normally, federal law directs state Medicaid programs to cover medical bills incurred up to three months prior to a beneficiary’s application date, according to a new issue brief from the Kaiser Family Foundation. The idea is to protect both patients and providers by ensuring that all medical bills are paid—even if the patient doesn’t file a Medicaid application until a calendar month after a traumatic event like a stroke or traumatic brain injury.

With Iowa’s waiver, though, coverage for Medicaid beneficiaries—with the exception of pregnant women and infants younger than 1 year old—will begin no earlier than the first day of the application month. In its approval (PDF) of the state’s application, CMS said the new policy would encourage beneficiaries to “obtain and maintain health coverage, even when healthy.”

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The state also projected that axing retroactive coverage will reduce monthly Medicaid enrollment by 3,344 people and reduce federal and state Medicaid spending by $36.8 million annually, according to its amendment request (PDF).

Iowa’s move makes it the fourth state to waive retroactive eligibility for certain populations since the Affordable Care Act was enacted, per KFF. Yet neither New Hampshire, Arkansas nor Indiana’s waivers—all approved by the Obama administration—apply to seniors and those with disabilities. In addition, very little is known about the impact of retroactive coverage waivers on beneficiaries and providers, the issue brief noted.

Meanwhile, since Iowa's retroactive coverage waiver elimination got the green light from CMS, other states may follow in its footsteps. For example, Kentucky has a similarly structured waiver application pending.

Regardless of which states implement retroactive coverage waivers, it will be critical to watch what steps they take to protect beneficiaries from incurring unpaid medical bills, according to KFF.

Indeed, Mary Nelle Trefz, a health policy associate at the Child & Family Policy Center in Des Moines, Iowa, worries that will be one of the biggest issues with Iowa’s newly altered waiver.

“We’re making it a lot more likely that Medicaid-eligible members are going to incur significant medical debt,” she told Kaiser Health News.

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