Over the protests of hospitals and medical providers, Iowa has received federal approval to reduce coverage for new Medicaid beneficiaries.

An estimated 40,000 Iowans are expected to be affected by the change, which will reduce their coverage for medical care delivered in the days and weeks before they are officially declared eligible for Medicaid.

The Iowa Hospital Association has objected to the change, arguing that it will “place a significant financial burden” on hospitals and reduce their ability to serve Iowa’s Medicaid population, especially in rural communities.

Historically, Iowa Medicaid has included a retroactive-eligibility provision that provides payment for health care services delivered in the three months leading to a person being formally declared eligible for Medicaid.

The intent of the provision is to ensure that healthcare providers accept patients even when those individuals haven't yet applied for Medicaid. It often comes into play when people are hit with an unexpected health crisis and need immediate admission to a care facility.

With retroactive payment, the health providers had some assurance that Medicaid eventually would pay for care that predated the decision on eligibility.

Earlier this year, the Iowa Department of Human Services asked the federal Centers for Medicare and Medicaid Services for permission to eliminate the three-month time-frame and have Medicaid pay only for the care that’s delivered from the first day of the month in which the patient applies for eligibility.

The state said the move would save $36.7 million for Iowa Medicaid, which serves more than 600,000 people and is funded by both the state and federal government.

The state’s share of the savings would be $9.7 million.

With more than 3,300 people enrolling in Iowa Medicaid each month, 40,000 Iowans would be affected by the change, which Human Services hopes to implement this week.

Pregnant women and infants younger than 1 will be exempted from the change.

At least three other states — Kentucky, New Hampshire and Arkansas — have proceeded with a similar plan or are seeking federal approval to do so.

The change in Iowa is the direct result of actions taken by the Legislature during the 2017 session.

Lawmakers approved a Human Services appropriations bill that specified several mandated cost-containment measures, one of which ordered the agency to eliminate retroactive benefits for Iowa Medicaid applicants.

In seeking federal approval to make that change, Human Services told the federal Centers for Medicare and Medicaid Services that the change would encourage individuals “to obtain and maintain health insurance coverage, even when healthy” — the exact language used by CMS last week in its formal letter approving the plan.

Human Services also said the change would make Medicaid more “closely aligned with the commercial market,” which doesn’t provide retroactive coverage to customers.

At least 40 people and organizations sent formal letters to CMS commenting on the proposal while the center was considering it. All of the letters expressed strong opposition.

The Iowa Health Care Association, which represents 800 nursing homes and assisted living centers, told CMS, “We know of no other state where CMS has taken away this benefit for this Medicaid population. We strongly encourage CMS to deny this (request) and not place the low-income elderly and disabled Iowans at risk.”

Wayne Marple, the chief financial officer for Inhance Corp., which owns two rural Iowa care facilities, told CMS, “I do not have strong enough words to describe my negative reaction” to the proposed change.

He pointed out that Medicaid’s $37 million in savings just means $37 million in additional costs to be absorbed by patients or care providers.

"With the state requesting elimination of (retroactive payment), our nursing homes will no longer admit any prospective resident who is Medicaid-pending, or will become Medicaid-pending shortly after admission,” he wrote. “This will result in other providers, primarily hospitals, to incur larger amounts of charity care due to a reduced source of payment for medical services."

Char Ten Clay of Orange City Area Health Systems in western Iowa told CMS the proposed change “is unconscionable” and said it will cause healthcare providers to eat the cost of treating patients as they wait for Medicaid’s approval for eligibility.

"Is there no sense of responsibility at all for the providers?" she wrote, stating that at one point Iowa Medicaid’s managed-care organizations owed her organization $100,000 for care provided to clients.

Marcia Oltrogge of the Northeast Iowa Mental Health Center told CMS, “I work in the mental health and substance-abuse field and see the immediate impact it would have on individuals who already face significant challenges. … If an individual’s income makes him eligible for the previous three months, then he should have the benefits even if he didn't know about them or use them."