Indiana Becomes the 29th State (Including DC) to Expand Medicaid

[Editor’s Note:  The terms and conditions and letter issued by federal CMS are available through these links: agreement, special terms and conditions and letter.]

Today Governor Mike Pence received approval from federal CMS for a Section 1115 waiver to implement his Healthy Indiana Plan (HIP2.0) and extend coverage to as many as 350,000 Hoosiers – according to state estimates. The agreement paves the way for the state to begin enrollment on February 1st and underscores that the Obama Administration is open for business when it comes to negotiating with Republican governors who want to accept federal Medicaid funding and fill the coverage gap.

It is terrific news that the drumbeat continues with a steady stream of Republican Governors bucking the ideologues in their own party to make the right choice and expand Medicaid. Up next on my list to watch is Tennessee where Governor Haslam has called a special session of the legislature next week.

But there are some causes for concern in this agreement as I talk about below and mentioned in my earlier blog. Some of these policies just don’t make sense. As this debate moves forward, let’s hope that the intense politics don’t take us further down the road of bad policy.

By recent standards, this was a long and protracted negotiation – Governor Pence originally announced the proposal in late May 2014. The basic structure builds on the state’s previously existing HIP program and uses the Medicaid managed care delivery system to provide services (i.e. it’s not Arkansas).

And as I blogged about earlier today, this is one of the most complicated proposals that we have seen so far. It seems to me that Indiana now has at least six different sets of benefits and cost-sharing rules for non-disabled adults in its Medicaid program. I worry that if I am having a hard time following this, that beneficiaries, consumer assisters, providers, plans and eligibility workers will too.

A good reason for this to be so complicated is that CMS did preserve the principle that no one under the poverty line should be denied access to coverage if they can’t afford the premium a state wishes to charge. In the case of Indiana, these premiums are dressed up and called contributions to POWER accounts.

But there is a rub – if you are below the poverty line and don’t pay your premium, you will pay a lot more cost sharing and have fewer benefits – no vision and dental most prominently. The cost-sharing amounts are all in line with what is allowed under regular Medicaid rules with one exception (Emphatic Note: Medicaid is so often derided as not giving states any flexibility but for non-disabled adults, states already have significant ability to charge copays and base their benefits package on a commercial standard). The state received approval to charge a $25 copay for the second time that someone using the ER and it is not an emergency.

As a technical aside, I was pleased to see that CMS approved this $25 charge through the use of “1916(f)” statutory authority – which includes very strict standards about studying and evaluating this approach. That is the proper disposition of such a request – the law is clear that testing higher cost-sharing must be studied carefully and the waiver approval sets up a process for that to happen. Indiana becomes the first state to receive such an approval – and I find it somewhat surprising that they wanted to go to the trouble to set up a control group and conduct a rigorous study when there are likely more effective ways to deter inappropriate use of the ER, but there you have it.

Lockout period is bad policy and bad precedent. A major concern with the agreement is the state’s ability to lockout those who are unable to pay premiums and have income between 100-138% of FPL for six months. We are strongly opposed to this idea, and I hope that other states don’t try to copy this precedent – though I bet some of them will. A six-month lockout is unprecedented and it’s unnecessarily punitive. Most states simply require backpayment of premiums owed before re-enrollment. For low wage workers who have little disposable income, a car repair or other unexpected expense can easily set them back. Now they face the prospect of being uninsured for an extended period of time which only raises financial insecurity for the worker and their family as well as the providers who will have to serve them in the event of an emergency.

Another concern with the approved agreement is the waiver of retroactive eligibility and rules around effective date of coverage. Without getting into the weeds, the bottom line is that it will take a lot longer for adults needing coverage to actually be enrolled and able to access services in Indiana than is the norm in Medicaid. Combined with the lockout, these provisions have the potential to contribute to gaps in coverage that are counter to the goals of expanding coverage and put both beneficiaries and providers at risk.

Voluntary premium assistance program coming next. More to come on this one as the state will not implement this right away but a new approach to premium assistance is included which has some positive and negative aspects to it.

On the plus-side, I am pleased that eligibility is voluntary and will be limited to adults — moving kids would raise a lot of questions for me. I like the emphasis on employer-sponsored coverage – though, as with most premium assistance programs, I wouldn’t expect substantial enrollment – especially because a 50% employer contribution is required. And I think the approach to ensuring that the state must certify that the employer-sponsored plans meet alternative benefit plans, Medicaid standards are worth exploring (as I have previously blogged, it is hard to make wraparound benefits work).

On the downside, I worry about a capped amount of $4,000 being set aside to meet any additional premium costs (beyond the 2% of income the person will pay and the minimum employer contribution), and all cost-sharing and deductible requirements. It seems like it should be enough but setting a cap violates the principle that Medicaid beneficiaries in premium assistance arrangements should not be made worse off in the process – and what if the cap gets lowered?

A lot of independent evaluation will be needed here. Unlike virtually all other states that have yet to embrace Medicaid expansion, Indiana was working from an existing program. That contributed to the complexity here. So all of these complicated aspects need to be carefully studied and not just by an evaluator paid for by the state.