Medicaid applications may take several weeks or months to process, and applicants frequently pay nursing home costs during the interim period. In addition, Medicaid coverage may actually be granted for some medical payments made during the three month period prior to filing of the application. The result of these circumstances is that most newly-approved Medicaid recipients will have retroactive coverage for a period of time which may have already been paid for privately.

The State of Louisiana enacted a statute to take advantage of this lapse of time. Under the Louisiana law, retroactive coverage was indeed available to applicants who qualified for Medicaid, but only to the extent that their health care providers refunded the private payments received during the application process. Furthermore, Louisiana made the repayment entirely voluntary.

Since Medicaid reimbursement rates are usually much lower than private-pay rates, Louisiana providers routinely declined to make refunds to applicants. Since refunds were not paid, the State did not make payments for Medicaid services and saved the cost of coverage for the three-month period.

In April, 1993, Louisianan Myrtle Blanchard received notice that she had qualified for Medicaid as of February 20 of that year. Ms. Blanchard was an insulin-dependent diabetic, and had paid $197.28 in pharmacy bills during the pendency of her application. She demanded that the pharmacy refund the payments and seek recovery from Medicaid, but the pharmacy declined.

Ms. Blanchard brought an action on behalf of all Medicaid applicants against the State of Louisiana, arguing that the effect of its statute was to make it impossible to secure retroactive coverage under Federal law. The Federal District Court agreed with her, and ordered the State to provide medical assistance to all Medicaid applicants for covered medical services during the three months prior to application for Medicaid. The State of Louisiana appealed from the District Court's ruling.

The Fifth Circuit Court of Appeals now agrees with Ms. Blanchard and the Federal District Court Judge. The appellate court notes that, "because Medicaid rates are usually much lower than the rates providers charge private patients, Medicaid providers in Louisiana have a disincentive to provide voluntary refunds to patients determined to be Medicaid eligible." Consequently, Louisiana has been ordered to modify its rules to actually provide reimbursement for covered medical expenses during the three-month period prior to Medicaid eligibility applications. Blanchard, et al., v. Forrest, January 8, 1996.

While the Blanchard case deals with general Medicaid eligibility (and not long-term care), it points up a similar problem frequently seen. Since ALTCS applications may take several months, family members often have paid nursing home bills which end up being covered retroactively by Medicaid. Family members (or the patient) are entitled to reimbursement, though the problem is complicated by the fact that the patient is still responsible for the "share of cost" payment during the months the application is pending. The calculation of the refund is left to the nursing home, which may fail to take any action to reimburse the patient, or even to raise the issue with patient or family.
 
  

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