Proposed Iowa Medicaid change would eliminate months of retroactive benefits

Correction: An earlier version of this story incorrectly stated that Iowa could be the first state in the nation, rather than one of the first, to approve a cut in retroactive Medicaid eligibility.

Dozens of individuals and organizations are protesting an effort by the state of Iowa to cut benefits for new Medicaid beneficiaries.

Currently, Medicaid has a retroactive-eligibility provision that provides payment for health care services that were delivered in the three months leading up to a person being formally declared eligible for Medicaid.

It’s intended to ensure that health care providers accept patients even when those individuals have yet to apply for Medicaid. It often comes into play when people are hit with an unexpected health crisis and need immediate admission to a care facility. With retroactive payment, the facilities have some assurance that Medicaid will eventually pay for the care that pre-dates the decision on eligibility.

The Iowa Department of Human Services has asked the federal Centers for Medicare and Medicaid Services for permission to eliminate the three-month time-frame and have Medicaid pay only for the care that’s delivered from the first day of the month in which the patient applies for eligibility. The state says the move would save Iowa Medicaid, which serves more than 600,000 people and is funded by both the state and federal government, $36.7 million. The state’s share of the savings would be $9.7 million.

If approved, Iowa would become one of the first states in the nation to deny Medicaid beneficiaries three months of retroactive coverage. With more than 3,300 individuals enrolling in Iowa Medicaid each month, 40,000 Iowans would be affected by the change, which DHS hopes to implement in just four weeks, on Oct. 1.

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The proposal is the result of actions taken by the Iowa Legislature during the 2017 session. Lawmakers approved a Human Services appropriations bill that specified several mandated cost-containment measures, one of which directed DHS to eliminate retroactive benefits for all Iowa Medicaid applicants. To do that, Iowa first needs the approval of CMS.

In its formal request to the federal agency, DHS says the change would “encourage individuals to obtain and maintain health insurance coverage, even when healthy.” It also says the change would make Medicaid more “closely aligned with the commercial market,” which doesn’t provide retroactive coverage to its customers.

In the past 20 days, 40 individuals and organizations have sent formal letters to CMS commenting on the proposal. All of them are strongly opposed.

The Iowa Health Care Association, which represents 800 nursing homes and assisted living centers, told CMS, “We know of no other state where CMS has taken away this benefit for this Medicaid population. We strongly encourage CMS to deny this (request) and not place the low-income elderly and disabled Iowans at risk.”

Wayne Marple, the chief financial officer for Inhance Corp., which owns two rural Iowa care facilities, told CMS, “I do not have strong enough words to describe my negative reaction” to the proposed change, pointing out that Medicaid’s $37 million in savings equates to $37 million in additional costs to be absorbed by patients or care providers.

“With the state requesting elimination of (retroactive payment), our nursing homes will no longer admit any prospective resident who is Medicaid-pending, or will become Medicaid-pending shortly after admission,” he wrote. “This will result in other providers, primarily hospitals, to incur larger amounts of charity care due to a reduced source of payment for medical services.”

Char TenClay of Orange City Area Health Systems in western Iowa told CMS the proposed charge “is unconscionable” and said it will cause health care providers to eat the cost of treating patients as they wait for Medicaid’s approval for eligibility.

“Is there no sense of responsibility at all for the providers?” she wrote, stating that at one point Iowa Medicaid’s managed care organizations owed her organization $100,000 for care provided to clients.

Marcia Oltrogge of the Northeast Iowa Mental Health Center told CMS, “I work in the mental health and substance-abuse field and see the immediate impact it would have on individuals who already face significant challenges … If an individual’s income makes him eligible for the previous three months, then he should have the benefits even if he didn't know about them or use them.”

The Iowa Hospital Association has also opposed the change, saying it will affect the financial stability of Iowa’s hospitals, especially in rural communities.