Washington Health Policy Week in Review

Washington Health Policy Week in Review is a weekly newsletter that offers selected stories from the daily newsletter CQ HealthBeat.

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CMS Tries to Let Indiana Down Gently on Bush Era Coverage Expansion

By John Reichard, CQ HealthBeat Editor

August 17, 2012 -- Indiana officials are expressing disappointment with the Obama administration's handling of a Bush era Medicaid expansion plan that covers thousands of previously uninsured residents in the state while charging them premiums in an effort to promote personal responsibility.

A July 31 letter from Cindy Mann, the director for the Center for Medicaid and CHIP Services, denies the state's request for a multi-year extension of the plan, which in technical jargon is known as a Medicaid waiver and was approved by the George W. Bush administration in 2007.

Indiana's Republican Gov. Mitch Daniels has touted the plan as a more affordable model for national coverage expansion.

Mann's letter agreed to extend the waiver, which expires at the end of 2012, through the end of 2013, but not into 2014 and beyond when the health care law expands Medicaid in a way that provides more comprehensive coverage than does the waiver plan.

"After two years of waiting for a response, the state has learned it may be forced to close enrollment for the 42,000-plus people in the Healthy Indiana Plan [HIP] beginning next year," the Indiana Family and Social Services Administration said in a written statement responding to Mann's letter.

"Indiana still does not have an answer about the long-term future of HIP," said Michael Gargano, who serves as secretary of the state office. "We will be forced to make a difficult decision about continuing HIP enrollment for a program that likely won't exist after 2013." Indiana officials have asked the Obama administration about using the plan as the basis of expanding Medicaid under the health care law but said they have received no response.

Kip Piper, a Medicaid consultant, said in an interview that Mann's letter "is a combination of an olive branch, a kick in the butt and an armistice proposal." Piper said the administration wants to avoid saying no to an existing coverage expansion program before the fall election. By extending the waiver for a year it hopes to avoid that.

But Indiana officials now have a big bargaining chip to keep the program going long term, Piper adds, because the Supreme Court made the health care law's Medicaid expansion optional for states. The Obama administration, by approving the waiver, could keep coverage going for up to 200 percent of the poverty level in Indiana. In some respects that's more generous than the health care law's Medicaid expansion, which only goes up to 138 percent of the poverty line. On the other hand, Healthy Indiana entails higher out-of-pocket charges than is the norm in Medicaid. By approving a multi-year waiver, the Obama administration would be setting a precedent that other states might also want to follow.

Mann wants to keep Indiana officials talking while preserving the status quo—for a time.

"The one-year extension will allow Indiana to provide continued coverage under its [waiver] while allowing time for the state and CMS to continue our discussions as Indiana considers its options for 2014," she wrote.