Washington Health Policy Week in Review Archive

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

  • May 19, 2014 Issue
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Indiana GOP Governor Proposes Medicaid Expansion Using HSAs

By Rebecca Adams, CQ HealthBeat Associate Editor

May 15, 2014 -- Republican Gov. Mike Pence of Indiana recently proposed an expansion of Medicaid that would have some consumers contribute to the cost of their coverage. But Pence took out some controversial parts of an ongoing state effort, such as limiting benefits and maintaining a waiting list.

If the Centers for Medicare and Medicaid Services (CMS) approves the plan that Pence announced last week, Indiana would become the 28th jurisdiction, including the District of Columbia, to expand Medicaid. That does not include Pennsylvania, which has already sent a plan to CMS for approval. The Indiana expansion would start in 2015.

Indiana's plan will be closely watched by other state officials to see how far CMS officials will go in approving elements such as a health savings account and a requirement that enrollees be referred to job training programs. CMS officials have allowed Indiana to use a health savings account model under a pilot program that the state started in 2008.

Between 334,000 to 598,334 Indiana residents could gain coverage through the expansion, according to state documents.

"There are two futures in health care—government-directed health care or consumer-driven health care," said Pence. "Indiana has chosen consumer-driven health care and intends to give eligible Hoosiers the power to make their own health care decisions."

Medicaid experts are keeping a close watch on whether other states, especially those led by Republicans, follow Indiana's lead.

"It is a significant development that Gov. Pence has indicated his strong interest in accepting the federal Medicaid expansion dollars," said Joan Alker, the executive director of the Georgetown University Center for Children and Families. "I think this could inspire other states to as well."

Alker said that there are clearly details that will need to be worked out between federal and state officials, especially on the issue of the costs that very low-income folks would pay for their Medicaid coverage. But she sounded optimistic that a deal will be reached.

"The Obama administration wants to get to yes, and Gov. Pence wants to build on his Healthy Indiana program —and I think they are both serious about coming to agreement," Alker said.

Under the proposal, Indiana residents who are eligible for Medicaid would be enrolled in an account to pay for medical costs. The individual would have to pay a $2,500 deductible before a private insurance plan would start picking up medical expenses.

The state would provide most of the funds for the savings account, but the individual would be expected to contribute, too. The plan calls for sliding scale contributions that start at $3 per month for an individual earning $214 per month and rise to $25 per month for someone with monthly income of $983 to $1,342. Those contributions are all slightly lower than the payments in the pilot program in 2012.

As long as beneficiaries put money into their accounts, they will have no other costs, except for a copayment of up to $25 for non-urgent use of a hospital emergency room that is waived if the patient calls a hotline before going to the hospital.

If the person does not make the contribution, the consequences would depend on how much income the individual makes.

People who make less than the federal poverty level—which is $11,670 for an individual this year— would be shifted into a less generous plan that does not include the dental and vision benefits that are in the other plan. The basic plan also has more limited pharmacy benefits and would require patients to pay co-payments.

People whose income is between 100 percent of the poverty level and 138 percent of poverty "would risk losing access to the program," according to Pence's plan.

The idea of cutting off benefits for people who don't pay into the account will be controversial.

So will another element of the plan, which requires non-disabled beneficiaries who are working less than 20 hours per week to be referred to the state's job training and job search programs. The beneficiaries will get information on job openings and training initiatives. The idea is a less stringent version of a program proposed in the Pennsylvania Medicaid waiver that CMS officials are currently weighing.

In 2016, Indiana will allow consumers to use Medicaid dollars to buy private coverage through their jobs. Consumers can choose between get coverage through the state Healthy Indiana program, or putting a state contribution toward the cost of insurance provided by their employers. Parents with kids in the Children's Health Insurance Program also would be able to choose to switch their kids to the family's employer-sponsored insurance plan, with a contribution from the government.

"We are encouraged by Indiana and Gov. Pence's commitment to helping cover more of the state's uninsured population through the Healthy Indiana program and look forward to seeing his proposal," said CMS spokeswoman Emma Sandoe in a statement.

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