The Medicaid Retroactive Payment Trap
Have you heard that Long Term Care Medicaid will pay the cost of care retroactively for up to three months? Yea, but what does this really mean and how is the rule actually applied? Understanding this rule correctly has a significant financial impact on the family and the facility.
The retroactive payment rule is a creature of federal statute. See 42 CFR 435.915. It represents a long-standing safety net for families faced with a sudden admission to a facility without the means to pay for it. A paraphrase of the federal rule is set out below:
The Medicaid state agency must make eligibility effective for up to three months leading up to the month of application if:
1. The applicant received Medicaid services of the type covered under the state plan; and
2. The applicant would have been eligible for Medicaid at the time such services were received had they applied.
See also 16 Del. Reg. Section 20370 for the Delaware statement of the retroactive rule.
The problem is that most admissions personnel at nursing facilities do not understand how the rule works, so they misapply it. They invariably think that the determinative element is that the patient has actually applied for Medicaid. Therefore, the admissions person refers to the rule as “Medicaid Pending”. They believe that Medicaid will pay for up to the three months that it takes to get the application finally approved. Thus, the facility admits the patient and only requires them to pay their income because Medicaid will pay retroactively the difference between income and list price. This is only true if the applicant is financially eligible each month until the approval is achieved.
Here is what you need to know to apply the rule correctly in Delaware. The retroactive rule is only available to applicants entering a skilled nursing facility. See part 1 of the rule above. Retroactive payments are not available to assisted living and home care patients. The maximum number of months subject to retroactive coverage is three.
The determinative element of the rule is found in part 2, “the applicant would have been eligible had they applied”. “Eligible” means the applicant was financially eligible because the asset and income requirements were completely satisfied for each month for which payment is sought.
Let’s put it all together. Identify the first month in which the patient can prove that they fully satisfied the applicable asset and income limitations for Medicaid. This is the “retroactive date”. Then identify the specific date that Medicaid approved the application in writing. This is the “base line date”. The time between the base line date and the retroactive date is the “retroactive period”. Medicaid will pay the facility retroactively for up to three months that fall within the retroactive period. Thus, Medicaid will pay retroactively from the “base line date.”
Please note that the date of application is only a secondary consideration. It does not set either the base line date or the retroactive date. The application date is only relevant in that only a filed application can be approved. It typically takes Medicaid in Delaware between 60 and 90 days thereafter to either approve or deny the application. Referring to the rule as “Medicaid pending” is a misnomer.
A facility should only admit a patient who is, or will be, able to prove compliance with the applicable asset and income limitations in the first month of admission. If the patient is admitted at a time when they have too many assets or too much gross income, there is going to be trouble. Proving full compliance with the asset and income limitations is technical and administratively difficult. Very few families are able to obtain approval for Medicaid without professional help. Thus, patients entering a facility financially unqualified for Medicaid will not get their application approved in less than 60 to 90 days. This leaves the facility holding the bag and the patient with a debt they cannot pay.
 This statement of the rule assumes that the application will be approved in the month that it is filed. This almost never happens in Delaware.
 There is nuance here: 1. If the applicant has too much gross income, a Miller trust is required. Until the Miller trust document is executed, the bank account opened, and funded with all sources of income, financial eligibility is impossible. For the month in which approval is sought, all required documentation must be filed. There cannot be a penalty period in place or an unanswered “we need” letter outstanding. If there is a history of gifting during the 5 year look back period, financial eligibility is impossible until the applicable penalty period is triggered and served.