After roughly two years of talks, Indiana and the federal Department of Health and Human Services announced a deal Tuesday to expand Medicaid that adopts many of the same concepts pursued by other conservative additions to the program but with notable departures that some health experts say are overly harsh toward the poor.
Indiana becomes the 28th state overall and the 10th under a Republican governor to expand Medicaid to people earning up to 138 percent of the federal poverty level, or about $16,000 for a single person. The move will cover an estimated 350,000 low-income residents.
The state also becomes the fourth to expand Medicaid through a special waiver that allows it to make some changes from the traditional program. Arkansas was the first, getting approval to use federal funding to pay for private health insurance. Other conservative states have pursued similar policies, as well as charging premiums or co-payments in order to offset costs or discourage wasteful care.
Like Arkansas, Indiana’s Medicaid expansion will go to pay for private health insurance plans. But Indiana is building off an existing state Medicaid program, the Healthy Indiana Plan, which offers high-deductible policies along with health savings accounts. Under that program, patients contribute no more than two percent of their incomes -- a limit imposed by the federal government -- while the state covers the difference between what beneficiaries pay and the cost of the deductible. Those contributions are made in lieu of co-payments and premiums, and patients can carry over unspent money if they leave the program.
The expanded version of the program requires similar contributions, but it offers both a more complete plan that includes vision and dental coverage, along with a basic plan offering medical coverage. The more generous plan is available to anyone willing to pay up to two percent of his income toward a health savings account, which the federal government still termed “premiums” in its approval of Indiana’s waiver. Those people will also be exempt from most other forms of additional cost-sharing, which the federal Centers for Medicare and Medicaid Services (CMS) limits to 5 percent of family income.
CMS has previously refused requests to charge premiums for people below the poverty line. But it is allowing Arkansas to require health-savings contributions to people below the poverty line as part of a controlled study that won’t jeopardize their coverage. Research shows premiums and cost-sharing for low-income people discourages them from seeking care. Some recent scholarship questions whether the administrative burden of enforcing payment requirements is worth it.
Indiana's governor argues the model helps prepare beneficiaries for the private market while making them more knowledgeable consumers of health care. “The expanded and updated [plan] is based on a program that has been serving 60,000 low-income Hoosiers in our state for seven years,” said Gov. Mike Pence in a statement announcing the agreement. “It is a proven model for Medicaid reform across the nation.”
In Indiana’s case, people below the poverty line who decide not to contribute to a health savings account will drop to a basic plan and will still have to cover cost-sharing in other ways, up to five percent of their incomes. People above the poverty line who stop making monthly contributions will be locked out of coverage for six months as a penalty.
That marks the first time CMS has allowed a “lock-out” in full Medicaid expansion. Pennsylvania made a similar request but was denied. A CMS spokesperson said by email that the state’s old program allowed for a full year lock-out, and the agency allows “grandfathering” of previously approved policies. But lock-out policies could become increasingly common. Tennessee, another Republican state negotiating with CMS over Medicaid expansion, has said it would like a similar lock-out policy if the agency granted Indiana's request.
The mandatory lock out strikes some as overly harsh and contrary to the mission of providing health care. “That seems to me to be excessively punitive and unnecessary,” said Joan Alker, who follows state Medicaid waivers as part of her work as the executive director at the Georgetown University Center for Children and Families. Other aspects may be familiar from other states, she added, but they discourage people from getting healthy. “A lot of this is, really, in my opinion, rhetoric about personal responsibility and doesn’t take into account things we already know.”
Another first is authorization to charge new Medicaid patients $8 for visiting an emergency room for an issue that's easily treatable in primary care and $25 for subsequent uses. Pennsylvania also received authorization for the $8 charge, which is CMS’ stated limit, but the agency does grant exceptions for short-term controlled studies, which is the case with Indiana.
Additionally, the state -- like others before it -- sought mandatory job-search referrals for unemployed patients, but CMS refused to budge. Instead, the state will “seek to encourage employment” through a separately administered and state-funded “incentive program,” according to CMS.
“While states may promote employment through state programs operated outside of the demonstration, this is not permitted under the Medicaid program,” the agency wrote in its press release.