The Healthy Indiana Plan, a vaunted state-sponsored health insurance plan for uninsured low-income adults, has been denied an extension by the Obama administration, forcing Indiana to reapply through a more complex waiver process.
If the federal government does not reverse its position, the signature health policy reform of Republican Gov. Mitch Daniels may cease to exist in 2012.
HIP was created in May 2007, making it the nation’s first Medicaid expansion modeled after high-deductible health plans (HDHP) and health savings accounts (HSA). Funded with a 44 cents-per-pack cigarette tax increase, the plan began enrolling patients in December 2007, and more than 30,000 Hoosiers applied for the program within the first three months of operation.
The program currently covers about 45,000 Hoosiers and has proven very popular.
HIP was designed to promote prevention, personal responsibility, and cost-conscious consumption of health care services. Indiana now wants to extend HIP, which expires on Dec. 31, 2012, to cover an expected 400,000 new enrollees for Medicaid who will become eligible under ObamaCare beginning in 2014.
Ninety-Eight Percent Approval
Unfortunately, federal officials have not approved the extension, according to Seema Verma, founder of SVC, Inc., a medical consulting firm, and one of the architects of HIP.
“We applied for an extension with the Department of Health and Human Services in March 2011. They turned us down because they hadn’t written the regulations for ObamaCare yet. Now we will have to go through the CMS and request a waiver through a State Plan Amendment (SPA) by showing there have been modifications to HIP and that it is budget-neutral. This is much more complicated than getting an extension and means that we will have to renew the plan every three to five years. We hope to apply for the waiver by the end of the year,” said Verma.
Unfortunately, HIP is running out of time. If the waiver is not approved in the coming months, HIP will expire and the patients who get their insurance through the program will lose their health insurance, says Verma.
“We think this would be a very bad outcome for the state since the program’s level of satisfaction is at an unheard-of 98 percent approval rating,” said Verma.
Giving Lower-Income Residents Control
To qualify for coverage by Healthy Indiana, individuals must:
• not have received health insurance for more than six months;
• not qualify for Medicaid or Medicare;
• be between ages 19 and 64 and a legal U.S. citizen; and
• earn less than $21,660 a year.
A key feature of HIP is that enrollees receive $1,100 each year in a health savings account which they can use to pay for health services. The amount they pay into the account is determined using a sliding scale based on income. Once their health costs exceed that amount, they are bumped over to a traditional health insurance plan.
Even though HIP has been very well received by Hoosiers, critics claim the program costs more than traditional Medicaid. Although HIP has served a large number of people who have been without health insurance for years, the costs for serving this population are higher because of the pent-up demand for health services, explains Verma.
“In some cases they’ve neglected seeing a doctor for years. There are more hospital visits and higher treatment costs initially, but over time, as you manage people’s care, the costs go down,” she said.
Encouraging Personal Responsibility
HIP has been described as creating a health savings account (HSA) for Medicaid.
“It’s consumer directed, and there are incentives for patients to control costs and get healthy. They’re required to make small contributions and get preventative check-ups. If they don’t make their monthly premium payments within 60 days, they are expelled from the program for 12 months,” she said. “In fact, about 75 percent of HIP patients get preventive care, and that’s almost unheard of in any state program.”
Verma says the plan was designed to ensure all participants, regardless of income level, have some skin in the game.
“Indiana puts aside some money for them to help them meet their deductible. At the end of the year, any money that is left over is rolled over to the next year to lower their deductible. With Medicaid, they are promised virtually unlimited treatment provided they can find a doctor or hospital to perform them,” Verma explains.
Clash with Obamacare Expected
Although the denial of an extension is disappointing for Indiana, it was not entirely unexpected. Gov. Daniels had repeatedly expressed concerns in interviews and public statements that his reforms would be a casualty Obama’s health care law.
“As matters stand, it will be annihilated,” Daniels said when asked about HIP in an interview in February 2011.
Grace-Marie Turner, president of the Galen Institute, says she hopes HIP survives the challenge.
“Gov. Daniels is brilliant for bringing market-based reforms to lower-income Hoosiers. The program is enormously popular, and the state caps Medicaid spending by bringing incentives for enrollees to make smarter choices about their medical care,” said Turner.
Turner maintains HIP represents a powerful model for Medicaid reform for other states.
“Unfortunately, the program is about to expire and the state is trying to get a waiver from ObamaCare through the Centers for Medicare & Medicaid Services, the people who grant the ObamaCare waivers,” Turner said. “Good luck, because if they’re unsuccessful, all those lower-income Hoosiers will not only lose their insurance through HIP, they will be lucky if they can enroll in a state health exchange which may not even exist yet.”