Retroactive Coverage Waivers: Coverage Lost and Nothing Learned

If you took cooking classes for more than two decades but still couldn’t boil water, wouldn’t you reconsider your lesson plan?

Using section 1115 demonstrations, the Department of Health and Human Services (HHS) can grant states waivers of federal Medicaid requirements, if and only if, the waivers enable the states to conduct health coverage experiments that will teach us lessons about how Medicaid coverage can be improved. HHS has been granting waivers of Medicaid’s retroactive coverage requirement for over two decades, and yet, nothing has been learned.

Let’s remember why retroactive coverage is important. Retroactive coverage in Medicaid allows people to receive coverage for health services received in the three months prior to filing a Medicaid application, if they met the eligibility requirements at the time. This is critical coverage because many uninsured individuals apply for Medicaid just after a major health event – for example, after a stroke. An individual might be hospitalized and incapacitated for weeks before they can start gathering materials and then file a Medicaid application. Without retroactive coverage, such an individual would have no coverage for their hospitalization, surgeries, and other care. They would face insurmountable bills and medical providers wouldn’t be paid for all of the vital care provided.

Furthermore, retroactive coverage waivers have a disproportionate impact on people of color. Census data show that black households are far more likely to have medical debt than white households (28% to 17%). Hispanic households are also more likely to have medical debt. (Households are also far more likely to have medical debt if they have children or a person with a disability, and high debt if they lack health insurance.) Retroactive coverage waivers expose more low-income people to medical debt, and this can only worsen health equity.

It would seem self-evident that not providing such retroactive coverage would be very bad for individuals and their health care providers. Nonetheless, HHS has granted waivers of retroactive coverage dozens of times over the past decades. The approvals have been based on unsound rationales, including the need to align with managed care payment systems and the need to “teach” enrollees how insurance works. Most recently, states have argued that they need waivers of retroactive coverage so that individuals are incentivized to apply early, conveniently ignoring the fact that most of the individuals don’t actually know that they’re even eligible for Medicaid, much less how the Medicaid retroactive eligibility rules work. (It is debatable whether most Medicaid caseworkers even understand the rules!) Of course, this posturing to “help people to enroll quickly” also doesn’t pass the laugh test: many of these same states are asking for retroactive coverage waivers in combination with a slew of other waivers that systematically reduce coverage – charging premiums, eliminating transportation, and more.

Currently, there are no less than 14 states that have a waiver of retroactive coverage.

Retroactive Coverage Waivers – Approved Section 1115 Demonstrations

Summary: States have been running experiments on waiving retroactive coverage since at least 1994 for traditionally eligible populations and 2014 for expansion adults. All experimental possibilities for the waiver have been exhausted – 14 states from all geographic regions of the country have ongoing, and in some cases long-lasting, retroactive coverage waivers that have applied to almost all beneficiary populations, including traditional eligibles and expansion adults. Only two of these states appear to have submitted evaluations of this policy. Rather than granting new waivers of 3-month retroactive coverage or extending existing waivers, CMS should conclude the experimentation and direct those states that have not yet submitted evaluations of the policy to do so.

Even though such waivers must be part of an experiment, 12 of the 14 states did not even include an evaluation of the retroactive coverage waiver component in their most recent project evaluation. HHS should be requiring, at a minimum, that every state collect metrics for and evaluate and report the impact on access to coverage, medical debt for individuals, and uncompensated costs for health care providers. But that has not happened. And the story only gets worse.

Oklahoma is one of the states that did include a retroactive coverage evaluation (for 2016-2018) in a recent demonstration evaluation report (submitted 2020). Remarkably, the evaluation conducted has nothing to do with the impact of eliminating coverage prior to application. It instead evaluates how “timely and accurately” applications are processed after they are filed. The state concludes the “evaluation findings support the hypothesis” that the experiment will be supported by a prompt enrollment system. While it is surely commendable if the state has a timely eligibility system, it is wholly irrelevant to the question of whether removing coverage prior to application is a good policy.

However, Oklahoma did find that instability in coverage (“churn”) actually increased over the demonstration period. The evaluation itself acknowledges that “[t]he increase suggests that a greater number of Demonstration beneficiaries were at risk of exposure to medical claims as the waiver period progressed.” This acknowledges the relevant fact: the policy leads to medical debt. The state then says that the harm will be reduced from 2019-2023, simply because the retroactive coverage waiver will be applied to fewer Medicaid enrollees. Nonetheless, HHS approved the waiver for 2019-2023, and there is still not a metric evaluating the impact on medical debt and uncompensated care losses.

So, to sum up, a waiver policy that is self-evidently harmful, and must be evaluated under section 1115 law, is generally not being evaluated and very occasionally being defectively evaluated, with some results tending to in fact confirm it is harmful. What is being learned? Absolutely nothing we’d want to learn.

Retroactive coverage is a statutory requirement that Congress put in place in 1973, and HHS has dramatically diverged from the letter and intent of that law. Considering HHS’s responsibility to administer the Medicaid statute, the clear requirement to only approve waivers that are meaningful experiments, and over two decades of nothing, HHS should not approve another retroactive coverage waiver. At this point, Congress has seen enough retroactive coverage “experiments” to assess whether the Medicaid statute needs revision. Congress has amended the Medicaid Act countless times since 1973, and has never removed the requirement. It is Congress’s role to revise policy; there is no further policy or legal basis for more waivers from HHS. At a minimum, HHS should honor Congress’s intent for real experiments with actual evaluations, and place an extraordinarily rigorous burden of proof on states to show the relevant, reliable, and significant evidence that justifies any retroactive coverage waiver. Evidence that should be readily available after two decades of experiments, right?

The truth is that HHS has learned nothing useful in over two decades of testing retroactive coverage waivers, while the harms and health inequities pile up. Isn’t it time to reconsider the lesson plan?