A tight state budget is pushing Iowa Medicaid to make some changes to how it retroactively reimburses care, but health care providers fear the move will hurt their bottom lines.

The Department of Human Services — which oversees the government-sponsored insurance program covering more than 600,000 poor and needy Iowans — has asked the federal government for permission to eliminate the three months of retroactive Medicaid benefits it reimburses for, according to documents filed with the federal Centers for Medicare and Medicaid Services. The changes would start Oct. 1, 2017.

“Eliminating Medicaid retroactivity encourages individuals to obtain and maintain health insurance coverage, even when healthy,” the state said in its waiver application, adding individuals still will receive coverage effective the first day of the month that their Medicaid application was filed.

New Medicaid enrollees currently can check a box that indicates they have unpaid medical bills. If the enrollee checks “yes,” the state reimburses providers for the previous three months of costs.

The changes were outlined this past legislative session in the Health and Human Services budget and is expected to save the state about $4.3 million and the federal government another $16.1 million in fiscal year 2018, according to DHS.

When combined with other Medicaid cost-containment strategies — stopping enhanced primary care provider payments among others — it will save $32 million annually, the Department of Human Services said.

More than 3,300 individuals enroll in the state’s Medicaid program each month, according to documents filed with CMS. That means about 40,000 people each year could be affected by the change — and providers argue those costs will be shifted onto them.

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The state’s 118 hospitals are against the move, saying the change could add a financial burden to hospitals and other safety-net providers, noting the cuts amount to about $26.8 million for providers.

“Patients who qualify for Medicaid often have significant financial needs, and this amendment will bring extreme financial strain and liability on Medicaid beneficiaries for their cost of care before enrollment with Medicaid,” wrote the Iowa Hospital Association. “Iowa’s hospitals care for all patients in need of emergency care, at all hours of the day, regardless of ability to pay. Therefore, this amendment will likely translate into increased bad debt and charity care for Iowa’s hospitals and will affect the financial stability of Iowa’s hospitals, especially in rural communities.”

DHS argues that the expansion of the Medicaid program under the Affordable Care Act, which gave coverage to an additional 150,000 Iowans, has pushed down charity care levels at hospitals. But the hospitals say that the projected provider cuts are far larger than the $10 million in cuts originally anticipated during the legislative session.

l Comments: (319) 398-8331; chelsea.keenan@thegazette.com