Why States Should Collect Medicaid Retroactive Eligibility Data

While the Medicaid retroactive eligibility requirement may not have major impacts on uncompensated care costs, changes to Medicaid retroactive eligibility could have damaging effects, according to an analysis from the Urban Institute.

Retroactive eligibility is the law of the land in Medicaid. It requires Medicaid programs to cover healthcare costs up to three months prior to the beneficiary’s application for Medicaid coverage. However, Section 1115 of the Social Security Act allows programs to waive this restriction.

Urban Institute researchers conducted an environmental scan, held interviews with national experts, and executed virtual case studies in five states that had an active Medicaid retroactive eligibility waiver. They also leveraged CMS Healthcare Cost Report Information System (HCRIS) data from 2011 to 2018, observing uncompensated care costs and Medicaid revenue.

Stakeholders who supported waiving retroactive eligibility cited the need to improve beneficiaries’ level of responsibility, pushing them to enroll in Medicaid while in good health. Additionally, stakeholders said that cost savings were behind the push for Section 1115 waivers in this area.

The hospitals’ uncompensated care remained fairly stable after states implemented the Section 1115 waivers to reduce retroactive eligibility. For example, in Arkansas, uncompensated care costs consumed 5.5 percent of hospital revenues before the waiver and 5.0 percent of hospital revenues after the waiver.

Medicaid’s share of hospital revenue did not grow or decline significantly in states that implemented Section 1115 waivers related to retroactive eligibility. Iowa saw the biggest growth in Medicaid revenue as a share of hospital revenue, but that was an increase of one percent.

Whether the hospitals had higher Medicaid revenue, in general, did not make a difference on uncompensated care costs’ share of hospital revenue before and after the Section 1115 demonstrations took place.

Although many stakeholders’ instincts told them that changes to retroactive eligibility had increased uncompensated care costs, stakeholders often could not identify evidence to prove this. When they could provide evidence, it was difficult to discern whether the results were tied to the Section 1115 waiver or another policy that restricted eligibility.

“Medicaid officials have suggested that restricting retroactive eligibility will encourage beneficiaries to enroll in and renew coverage promptly, and CMS approved waivers using this rationale. But, to our knowledge, no evidence shows waivers have had this effect, which is predicated on beneficiaries’ awareness of retroactive eligibility protections and the consequences of its elimination,” the researchers stated.

The researchers recommended that more evidence should be gathered regarding the impacts of waiving retroactive eligibility regulations before approving other states’ Section 1115 demonstrations. They also stated that CMS enforce a third-party evaluation of Section 1115 demonstrations related to retroactive eligibility before approving such waivers.

Medicaid expansion is thought to improve the rate of uncompensated care, according to a previous study that the Urban Institute conducted. 

The study found that 3.9 million uninsured Americans would gain coverage if all 15 states that had not expanded Medicaid at the time did so. It also discovered that uncompensated care could have dropped by approximately $6.4 billion across the 15 nonexpansion states.

A separate Urban Institute study found that extending the Affordable Car each premium tax credits could also lead to a drop in uncompensated care costs. The study discovered that while such a policy would cost the federal government $3.0 billion in premium tax credits alone, it could be in part offset by the $192 million decline in uncompensated care.

Uncompensated care costs are an important indicator for patients as well as providers because they demonstrate the impact of uninsurance and restricted access to affordable healthcare coverage, a Kaiser Family Foundation brief explained. 

While the Affordable Care Act has done much to diminish uncompensated care costs, the nation still has a long way to go to secure widespread healthcare coverage. Many factors will influence that trajectory, including waivers like the retroactive eligibility waiver and the adoption of Medicaid expansion.