By BRIAN STANLEY
Patients waiting on Medicaid enrollment face more bills, while Congress touts that as cost savings. Hospitals need to choose their stance.
Medicaid covers the lion’s share of short- and long-term health care expenses for low-income, older, and/or disabled Americans. Until now, the program paid for care received up to three months before someone filed for Medicaid, as long as the person was eligible at the time. That grace period has long been a safety net for people who fall ill before navigating the maze of Medicaid enrollment.
In a quiet change tucked into the “Big Beautiful Bill,” lawmakers shrunk that window by one to two months, depending on the state.
Now, for adults in Medicaid expansion programs, retroactive coverage stops at one month before enrollment. For traditional Medicaid enrollees, it’s two months.
The Congressional Budget Office estimates this change will “save” the government billions over the next decade. But those “savings” don’t reflect fewer illnesses or better care. Instead, they are unpaid bills and costs that move downstream to patients, nursing homes, and other parts of the health care system.
These changes can impact any of us.
Any health event can set off a chain of care – hospitalization, rehab, then long-term nursing home placement – that easily stretches past 30 or 60 days. Under the new rules, that early care will fall outside Medicaid’s reach: the first month or two of costs now sit squarely with the patient or facility.
Still, this change is especially harmful for dual eligible beneficiaries. Americans on Medicare who become eligible for Medicaid enrollment – think older adults or people with disabilities – are at particular risk.
This scenario plays out often: a person has Medicare and then experiences an illness or injury that drives their assets down. They then become eligible for Medicaid, in addition to holding their Medicare enrollment. For these Americans, the shift in the “Big Beautiful Bill” means that they face significant bills while they wait for their Medicaid enrollment to be completed.
We know that this population, and realistically, all Americans, suffer when retroactive coverage is taken away from them.
For example, some states that have tried shrinking eligibility windows on their own have had to reverse course for the obvious reason that care is expensive, and shrinking the eligibility window only exacerbates problems for new dual eligible individuals and their loved ones.
Despite all of this gloom, hospitals have the chance to address a lot of the harm discussed here. While they can’t undo the eligibility problem created by Congress, they can decide who pays for it. Spoiler, it should be the 340B Drug Pricing Program.
The 340B program allows eligible hospitals to buy outpatient drugs at deep discounts and keep the difference when reimbursed at full price. So, if an eligible hospital buys a medication at-production cost of $30, but the medication usually costs $100, the hospital is reimbursed at the full $100, netting $70.
These revenues, in the billions nationwide, are intended to stretch scarce resources and support care for low-income patients. But that’s not always how it works.
Hospitals that qualify for the 340B program use the savings with wide variation. Some use it to expand clinics or community programs, while others simply absorb them as revenue.
The new limits on Medicaid look-back period create a clear opportunity to put 340B dollars to work where the need is undeniable. Hospitals that qualify for 340B are federally funded safety-net institutions already serving many Medicaid and low-income Medicare populations. Redirecting a portion of their 340B profits to cover medical costs for patients caught outside the new 30- or 60-day window would turn abstract patient “savings” into real protection.
Hospitals can operationalize this in a few ways.
For instance, they could establish a network-wide fund to absorb the uncovered portion of care for patients awaiting Medicaid enrollment. Social workers, clinicians, and not-for-profit groups helping patients and their families transition into Medicaid or long-term care could be the arbiters of this plan, similar to how they are often gate keepers for fuel or housing assistance funds. Alternatively, hospitals could pool all 340B funds at the end of the year and use a portion of them to cover patient-level expenses that arose from the window shrink.
Repurposing 340B funds is a straightforward way to prevent medical debt for patients who should have been eligible, and it’s easily operational. For the hospital, this move would demonstrate visible community benefit at a time when hospitals face growing scrutiny over how little charity care they provide. Similarly, the move would spare hospital staff who work with families navigating this change, lowering burden for staff and patients.
In the future, Congress could consider amending 340B rules to require that hospitals set aside a portion of funding for this purpose. Otherwise, hospitals might have little incentive to repurpose these funds. It might not be realistic in this Congress, but may gain traction going forward.
While this idea won’t erase every gap left by the new eligibility rules, even redirecting a portion of 340B revenue toward covering retroactive care would ensure that patients aren’t punished for the timing of their illness.
Brian Stanley is a senior policy analyst at the at Boston University School of Public Health
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