Indiana health plan hinges on federal buy-in

WASHINGTON – Whether hundreds of thousands of Hoosiers will be able to get health insurance through Medicaid under the Affordable Care Act may hinge on whether the federal government approves a state plan that requires them to pay some of the cost of their health care.

“This is such a key part of our plan,” said Debra Minott, secretary of the Indiana Family and Social Services Administration. “If you don’t have any of these elements of personal responsibility, it really just turns into a regular Medicaid program.”

At least two other states — Michigan and Iowa — are trying a similar approach. And because their proposals are further along, they might provide guidance on what the federal government is willing to accept as states try to find a way to expand Medicaid on their own terms.

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“It just seems like every state is looking for its own stamp on the way that they’re expanding,” said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities. “We’re not seeing necessarily a ‘yes’ or ‘no’ decision on expansion. We’re seeing a decision of ‘Yes, but we’re going to do it in this way.’ ”

The 2010 health care overhaul law allows states to expand Medicaid to those earning up to 138 percent of the federal poverty level, with the federal government picking up most of the cost for the newly eligible.

Indiana Gov. Mike Pence has said that the only Medicaid expansion he’ll consider is one modeled after the state’s Healthy Indiana Plan. That’s a pilot Medicaid program that Indiana had been operating since 2008 for Hoosiers earning up to 200 percent of the federal poverty line.

Currently, about 37,000 Hoosiers are enrolled in Healthy Indiana and another nearly 53,000 are on a waiting list. But by the end of this year, about a third of those enrolled — 10,631 — earning more than 100 percent of the federal povery level will be required to transfer to the federal health exchange. This will free slots for those on the waiting list who still qualify under the new threshold.

If Indiana expands Medicaid, about 400,000 Hoosiers could be eligible for Healthy Indiana-style coverage. The federal government would pay for the entire cost through 2016. The federal share phases down to 90 percent by 2020.

Unlike traditional Medicaid, Healthy Indiana caps the number of participants and the amount of care they can receive, does not cover all the services that Medicaid does, and requires cost-sharing from recipients toward the first $1,100 of care. That cost-sharing fosters personal responsibility and keeps costs down by giving patients an incentive to make smarter, cheaper, choices about their care, Pence argues.

In a letter sent to Health and Human Services Secretary Kathleen Sebelius last month to request a one-on-one meeting to discuss Medicaid expansion, Pence said it’s essential that Indiana be able to keep its “consumer-driven model.”

Federal law, however, limits how much cost sharing can be required of Medicaid recipients. Generally, adults can be subject to some nominal cost sharing, such as copayments for visits to the doctors or for a prescription drug. But states can’t charge premiums for those making less than 150 percent of the federal poverty level.

Indiana is trying to make the case that the required contributions under Healthy Indiana to a recipient’s “personal wellness and responsibility account” is not the same as charging a premium. It’s more like a copayment, Minott said, because the money in the account is used to pay for services.

“That’s one of the points that ultimately the governor will want to review with Secretary Sebelius because we haven’t really been able to make inroads on that with (the Centers for Medicare and Medicaid Services),” Minott said.

Michigan is using a similar concept of a savings account for those above the poverty line. Those recipients will have to contribute up to 2 percent of their income into a dedicated health account that is used to cover their copayments for care. But unlike the Healthy Indiana Program, people who don’t make their monthly contribution to the account can’t be kicked off Medicaid.

Robin Rudowitz, associate director for the Kaiser Commission on Medicaid and the Uninsured, said that’s the biggest difference between Michigan’s plan and Healthy Indiana.

“Michigan is very explicit that failure to pay does not mean they’re kicked off,” she said.

Iowa has proposed requiring a monthly contribution for those making between 50 percent and 100 percent of poverty. (Those earning more than that would get help paying for premiums to buy private coverage.) The monthly contribution for those below the poverty line, however, would be waived if the recipient engages in a “health improvement behavior,” such as getting a physical. And recipients can also apply for a hardship waiver if they can’t afford the payment.

Although neither Iowa’s nor Michigan’s proposals have been approved, both the states and the federal government expect that they will reach an agreement.

Pennsylvania is considering requiring premium contributions that could be reduced if recipients take a health or wellness action and participate in a job search and training program.

States are supposed to show that there’s an experimental value to any change they want to make to Medicaid that could potentially benefit the overall program. But health policy research has shown that copayments cause low-income people to forego even medically necessary care, according to the Kaiser Family Foundation.

“In the past, with Indiana and other states that had moved forward with these waivers to expand coverage, generally these were to populations like childless adults who were otherwise not eligible for coverage,” Rudowitz said. “Now, with the ACA, you have this new coverage pathway with a lot of federal funding to support that... (so it’s) what will they be demonstrating” to justify a waiver.

Minott said Indiana has looked at Michigan’s approach and continues to bat around ideas about how to retain key components from the Healthy Indiana Plan that are also not logistically difficult to administer.

Although the Department of Health and Human Services has not yet arranged the sit-down between Pence and Sebelius, Minott said the federal government is interested in reaching an agreement.

“I really think that it is their goal to get as many people covered as possible. At the same time, there seems to be some ideologies that are held to pretty tightly that are interfering with that,” she said. “But I definitely feel like they’re trying to work with us. We’re certainly still optimistic and working forward on that premise.”

Contact Maureen Groppe at mgroppe@gannett.com or @mgroppe on Twitter