(Another chapter in the unfolding saga of Round 2 of Medicaid expansion, which I call “from simplicity to complexity”.)

A few weeks ago I blogged about Governor Pence’s announcement of his intention to submit a waiver request to expand his Medicaid program using “Healthy Indiana 2.0” as a starting point. The state is currently taking comments from the public, and we expect the revised proposal to be submitted to the federal government sometime in July. HIP 2.0 builds off of the state’s current waiver program but with some significant new features and restrictions.

Now that I have had a chance to look at more of the details in the proposal, here are my latest thoughts:

I don’t think HIP 2.0 will inspire any Taylor Swift songs – its complicated and messy and not really that HIP (sorry!). But as I mentioned in my earlier blog, I think this proposal is in the ballpark. It seems clear that a hefty amount of pre-negotiating has taken place between the state and federal CMS and, while there are issues to be resolved, I think we will see some version of this demonstration approved. Still, the proposal raises many questions.

First and foremost, Healthy Indiana continues the trend of incredibly complicated programs being developed in an effort to deal with tough politics and a strong desire on the part of the Administration to ensure that coverage is extended. There is no doubt about it, the Supreme Court opened the door to quite a kettle of fish.   Governors and legislators are working overtime to come up with various ways to reinvent the wheel by creating their own versions of the Medicaid expansion.  Recent proposals from Iowa, Pennsylvania and now Indiana in some ways break new ground;  but I doubt these innovations will improve Medicaid for consumers. They will add lots of red tape and administrative complexity.

And if every state has to have its own “thing” then Hoosiers’ date to this party is the “POWER accounts.” Described by Governor Pence as consumer-directed health care built on high deductible savings accounts, they are actually a lot more nuanced than that.

The basic construct is this – the state will charge monthly premiums – or in HIP 2.0 parlance monthly contributions to individual POWER accounts, and then the state (using federal Medicaid $ of course) will pay the rest up to the deductible. These payments will start for those with no income (ie 0-22% of the federal poverty line) at $3 a month and go up to $25 for those between the poverty line and 138% of FPL.  (Note: One of the provisions that looks like it will not fly to me is that those over the poverty line who don’t pay into their accounts will be subject to a very harsh six-month lockout period).

Now for those of you who have been following Medicaid “waiverland” closely, you might be wondering if CMS will approve something that looks very much like premiums for people below the poverty line – an issue hotly contested in Iowa where the final agreement reflected the condition that no one can be denied enrollment if they don’t pay. So in a new twist, what Indiana is proposing is that if you don’t pay into your account then you will get a lesser benefits package – called HIP Basic – which has fewer benefits and higher copays.

Those who do pay into their accounts will receive HIP Plus, which includes dental and vision coverage among other things. And there will be no copays in HIP Plus except for a $25 fee for non-emergency use of the ER.

Interestingly enough, it looks like the copays that are being proposed (with the exception of the $25 copay for non-emergency use of the ER) are actually in line with the flexibility afforded to states by recent CMS rules that updated what counts as nominal. And it appears that HIP Basic, while slimmed down, is a benefits package that states could provide to adults anyway. So a waiver is not needed for this slimmer HIP Basic package – the waiver is needed to create two different tiers of coverage for those who do and do not pay into their accounts – both of which could meet Medicaid standards.

Just because Medicaid rules permit copays does not mean that charging copays to people below the poverty line is a good idea.  It’s a pennywise pound-foolish approach as plenty of research has shown that copays will deter needed care for low-income individuals. So a key issue in implementation and approval will be whether or not copayments for those below poverty can be used to deny access to needed services.  That is not permitted under Medicaid rules.

But getting back to the bigger picture, you can see why I started out on the theme of going from simplicity to complexity. I think I will stop there and do a follow up on the premium assistance component of Indiana’s plan at a later date.

Along with our partners at the Center on Budget and Policy Priorities , we will submit comments when the waiver reaches the appropriate stage of the approval process so stay tuned.