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A recent, quietly implemented change to Medicaid eligibility is shifting healthcare costs onto patients, even as lawmakers claim billions in savings.
Retroactive Coverage Cuts: Who Pays the Price?
The shrinking window for Medicaid’s retroactive coverage is leaving patients wiht unexpected bills and forcing hospitals to consider how to fill the gap.
- Medicaid, a vital program for low-income, older, and disabled Americans, historically covered healthcare expenses for up to three months prior to enrollment.
- The “Big Beautiful Bill” reduced this retroactive coverage window to one month for those in Medicaid expansion programs and two months for traditional enrollees.
- The Congressional Budget Office projects billions in savings, but these savings come at the expense of patients, nursing homes, and other healthcare providers.
- Hospitals, notably those participating in the 340B Drug Pricing Program, have an possibility to mitigate the harm by using program funds to cover the uncovered costs.
Medicaid currently covers the lion’s share of both short- and long-term health care expenses for low-income, older, and/or disabled Americans. For years, the program offered a crucial safety net, paying for care received up to three months before someone officially filed for Medicaid, provided they were ultimately eligible. This grace period was especially important for individuals who became ill and then navigated the often-complex Medicaid enrollment process.
That safety net has been quietly diminished. A change tucked into the recently passed “Big Beautiful Bill” shrinks that coverage window by one to two months,depending on the state. Now, adults in Medicaid expansion programs will only have one month of retroactive coverage, while those in traditional Medicaid will have two.
The Congressional Budget Office estimates this change will “save” the government billions over the next decade. Though, these “savings” aren’t the result of improved health or reduced illness; they represent unpaid bills and costs that are being shifted downstream to patients, nursing homes, and other parts of the healthcare system.
This change has the potential to impact anyone. A single health event – hospitalization, rehabilitation, or even long-term nursing home placement – can easily generate costs that exceed 30 or 60 days. Under the new rules,the initial month or two of care will no longer be covered by Medicaid,leaving the patient or facility responsible for those expenses.
Hospitals are on the front lines of this shift. They will be forced to absorb some of these costs, potentially impacting their financial stability. More importantly, they will be faced with the ethical dilemma of how to handle bills for patients who reasonably believed their care would be covered.
Fortunately, hospitals have a potential solution at their disposal: the 340B Drug Pricing Program.This program allows eligible hospitals to purchase outpatient drugs at considerably reduced prices. While the primary intent of 340B is to stretch limited resources and improve access to care, its funds can also be used to provide financial assistance to patients.
Repurposing 340B funds offers a straightforward way to prevent medical debt for eligible patients and is easily implemented. For hospitals, this move would demonstrate a visible commitment to community benefit, particularly as they face increasing scrutiny regarding their charity care contributions. It would also alleviate the burden on hospital staff who assist families navigating these changes.
Hospitals could operationalize this in several ways. They could establish a network-wide fund to cover the uncovered portion of care for patients awaiting Medicaid enrollment, with social workers, clinicians, and non-profit organizations acting as arbiters, similar to how they manage funds for fuel or housing assistance. Alternatively,hospitals could pool all 340B funds annually and allocate a portion to cover patient-level expenses arising from the reduced coverage window.
Looking ahead, Congress could consider amending 340B rules to require hospitals to set aside funds for this purpose.
