HIP 2.0, a plan proposed by Gov. Mike Pence (R-IN) to expand Medicaid in Indiana, has embarked on a $2 million ad campaign to sign up more Hoosiers, despite criticism the plan’s benefits are too generous and they disincentivize people from leaving the program.
Since Feb. 1, HIP 2.0 has signed up some 177,000 Hoosiers, and the statewide ad campaign is projected to help increase enrollment by 357,000 by the end of 2015.
Pence’s plan injects Medicaid with elements of a consumer-driven health plan, developed under his predecessor as governor, Mitch Daniels (R), in which enrollees are encouraged to act more like cost-conscious consumers by paying attention to prices, using the emergency room only for emergencies, and keeping their appointments.
More than 71 percent of enrolled HIP 2.0 members are participating in the HIP Plus program, which provides vision and dental benefits as well as health insurance. It also allows members to avoid copayments because they pay monthly payments into a type of health savings account (HSA). An individual with an annual income of $10,000, for example, would pay about $16 a month, and a family of four making $32,000 would pay more than $50 a month.
HIP Basic does not require a monthly premium, but it offers fewer benefits, and users have copays.
Big Differences from Daniels’ HIP
HIP 2.0 expands the Healthy Indiana Plan, a waiver program first introduced in 2008 that expanded Medicaid eligibility to 200 percent of the federal poverty level—about $44,000 a year for a family of four in 2008. It offered limited health benefits with a health savings account, much like the high-deductible, “consumer-driver” plans available on the private market.
The Healthy Indiana Plan under Daniels provided health savings accounts that required enrollees to meet a $1,100 deductible, mostly funded with Medicaid dollars, before coverage kicked in, and they had to contribute monthly to their health savings account based on income—no more than 2 percent of household income for those below the poverty line. Those who stopped contributing would be kicked out of the program for a year, and enrollment would be capped based on available funding.
John Davidson, director of the Center for Health Care Policy at the Texas Public Policy Foundation, describes HIP 2.0 as a long-term financial liability for Indiana. HIP 2.0 goes far beyond what the original HIP plan included, dragging the entire non-disabled Medicaid population into the expansion scheme, not just those above the poverty line, Davidson says.
HIP 2.0 offers enrollees a choice between a HIP Basic and a HIP Plus plan. Some can also choose a plan that supplements employer coverage, a longstanding feature of traditional Medicaid. The HIP Plus and HIP Basic plans feature a health savings account with a $2,500 deductible, funded almost entirely by taxpayers.
Davidson says the basic plan requires nothing of enrollees because they get a health savings account and can either pay into it or not, and the state will still cover the entire cost of the deductible and limit copayments to 5 percent of income, as they are for all Medicaid programs everywhere.
The HIP Plus plan also includes vision and dental coverage and comprehensive prescription drug coverage, and it requires no cost-sharing as long as an enrollee keeps up with the monthly contributions to their account, which range from $3 to $25 a month, Davidson says. An enrollee who stops paying into the account won’t be kicked out of the program but simply gets put on the basic plan.
If you want to have HSAs built into Medicaid in order for enrollees to behave like people who actually have HSAs, then they need some kind of stake, or skin in the game, Davidson says.
“Unfortunately, the number of financial hardship exemptions, [circumstances] that would keep enrollees from [being required to make] their monthly deposits, are so great and ill-defined, and HIP 2.0 juices up the benefits so much, the program incentivizes them to stay on Medicaid,” Davidson said.
Criticized as Redundant
Devon Herrick, a senior fellow at the National Center for Policy Analysis says it makes no sense for Indiana to expand its HIP program to 200 percent of the poverty line because low-income individuals earning above the poverty line already have access to sliding-scale subsidies for private coverage in the Obamacare exchange.
“They would lose this under Pence’s plan,” Herrick said.
Greg Scandlen, a senior fellow at The Heartland Institute, which publishes Health Care News, says any income-based welfare program discourages individual initiative among recipients.
“That is axiomatic,” Scandlen said. “But it is also possible that the HIP plan will curtail costs provided that people have some ownership over the HSA money.”
Kenneth Artz ([email protected]) is managing editor of Health Care News.
“HIP 2.0 1115 Waiver Application,” State of Indiana, July 2, 2014: https://heartland.org/policy-documents/hip-20-1115-waiver-application
John Davidson, “Indiana Gov. Mike Pence’s ‘Alternative’ Medicaid Expansion Is the Worst One Yet,” Texas Public Policy Foundation, January 28, 2015: http://www.texaspolicy.com/blog/detail/indiana-gov-mike-pences-alternative-medicaid-expansion-is-the-worst-one-yet