In this blog series, America’s Essential Hospitals forecasts the direction the administration might take on several aspects of Medicaid policy of importance to essential hospitals, including those related to expansion, social determinants of health, and program eligibility.

As a jointly run federal and state program, Medicaid has eligibility requirements that vary by state. While all states must cover certain beneficiary groups — including low-income families, qualified pregnant women, and children — states have flexibility to cover other groups.

Before the 2010 passage of the Affordable Care Act (ACA), many states did not cover most low-income adults without children. However, the ACA included a Medicaid expansion to low-income adults earning up to 138 percent of the federal poverty level (FPL), which the Supreme Court later deemed optional for states.

Both states and the Trump administration have expressed interest in policies affecting eligibility, most of which would restrict eligibility by changing qualification requirements. Also, some policies already approved by the Centers for Medicare & Medicaid Services (CMS) — including waiving retroactive eligibility and implementing work requirements — have eligibility implications that vary by state.

Retroactive Eligibility

Medicaid coverage starts the day an individual is deemed eligible or, in some states, on the first day of that month. Under the federal Medicaid statute, states also are required to cover medical bills incurred up to three months before an individual’s application date if the individual would have been eligible for coverage during that time. This retroactive eligibility, or retroactive coverage, ensures individuals are shielded from costs incurred because they were unaware of their eligibility or unable to enroll before needing services. Essential hospitals are an important resource to help patients determine their eligibility for Medicaid and other assistance programs.

Some states use CMS waivers to eliminate retroactive eligibility to control costs. To date, eight states have CMS-approved waivers that eliminate retroactive eligibility for either their expansion or non-expansion populations. Figure 1 shows a complete list of states with retroactive eligibility waivers.

Figure 1: States with Retroactive Eligibility Waivers

Expansion Population Non-Expansion Population
New Hampshire*
New Mexico
New Mexico

*Waiver set aside by court as part of ongoing litigation on Medicaid work requirements.

Individuals in these states no longer can receive Medicaid coverage for services received before they are deemed eligible for Medicaid. Retroactive coverage is important to essential hospitals because it allows them to receive reimbursement for services they provide as part of their mission to care for all, including the vulnerable. Eliminating it can have a significant and negative financial effect on essential hospitals, which account for 23 percent of charity care and 17.4 percent of uncompensated care provided nationwide, despite comprising only 6 percent of all U.S. hospitals. Essential hospitals also rely heavily on reimbursement from public insurance programs, including Medicaid.

Work Requirements

Imposing work and community engagement requirements as a condition of Medicaid eligibility has been a high priority for CMS since the early days of the Trump administration. To date, nine states have received approval for Section 1115 waivers that incorporate work requirements into eligibility determinations, though none currently are in effect. Legal action has halted implementation in three states, and the fate of the policy is still unclear.

Arkansas was the only state to implement work requirements before they were blocked by the courts. During the roughly nine months the requirements were in effect, 18,000 individuals lost their Medicaid coverage. A recent study published in The New England Journal of Medicine attributed the coverage losses to confusion and difficulty documenting compliance, not to individuals’ ability to find work.

More Changes to Come

States and the administration likely will continue to seek ways to alter Medicaid eligibility and pursue their priorities for the program. Medicaid’s foundations as a state-federal partnership, together with the growth of Section 1115 waivers and other authorities, provide ample opportunities for program experimentation.

While some states have expanded the program, others are concerned with the increasing share of state budgets Medicaid consumes. Restricting eligibility requirements can limit the number of beneficiaries, and, therefore, the states’ direct cost for providing services. Eligibility requirements are an important mechanism for states as they continue to balance the difficulty of financing the program with the necessity to serve individuals in need.