Research & Commentary: The ‘Idaho Health Care Plan’ Falls Short

Published January 24, 2018

The Idaho Legislature is currently considering two paired waivers supported by Gov. Butch Otter (R). The waivers would request the U.S. Department of Health and Human Services (HHS) to permit the state to move those with “medically complex conditions” from the individual insurance market to Medicaid; the hope is that by moving costly insured Idahoans from the state’s exchange, the negative effect they have on pricing in the individual insurance market would be mitigated, thereby bringing down costs.

Unfortunately, this proposal, referred to as the Idaho Health Care Plan, would do little to improve the state’s $550 million Medicaid program. In fact, if the plan is approved, it would shift more of the costs associated with high-risk patients to taxpayers.

The proposed waivers attempt to circumvent the federal requirement for budget neutrality by requesting a decrease in the Advance Premium Tax Credit amount, which the government pays to Idaho recipients. This request can only be made if the Department of Health and Human Services approves the state’s 1332 waiver proposal, which allow states to apply to HHS for changes to their Obamacare markets.

Under the Idaho Health Care Plan, between 2,500 and 3,500 Idahoans would be considered to have medically complex conditions. Moving these people into Medicaid would initially cost $100 million per year. State taxpayers would be required to cover nearly $30 million of the total costs.

The primary rationale for waivers is that they can help states make reforms that save money while improving services, but the plan in Idaho aims to save money by shifting chronically sick patients out of the private insurance market, where they receive Obamacare’s premium tax credit, and into Medicaid, which receives additional government funding.

The effect on both the individual market and Medicaid created by removing high-cost patients is far from clear. There is no guarantee the promised private market premium reductions will ever come to fruition.

The governor’s plan to shift chronically ill Idahoans out of private insurance and onto Medicaid would dramatically reduce reimbursement for doctors and hospitals that provide their care. According to the Urban Institute, Medicaid reimburses Idaho physicians just 76 cents for every dollar of compensation they receive from private insurance.

Forcing doctors to accept substantially lower reimbursements will likely make it harder for these vulnerable patients to receive care and further endanger their health, which was first found in Oregon. In 2008, Oregon expanded its Medicaid program to 30,000 more people selected randomly from a waiting list of 90,000. A 2013 study published in The New England Journal of Medicine found Oregon’s expanded Medicaid program failed to achieve the primary goal of all health care reform: improving overall health. The NEJM report analyzed actual outcomes for more than 12,000 patients newly enrolled in the program. It found Medicaid did not improve health outcomes for those patients.

In addition to all the problems posed by these two waivers, there is no guarantee it will be approved. The early indication from previously considered waiver proposals is that the Trump administration is not interested in bailing out Obamacare; it has instead chosen to block state waivers that seek to prop up collapsing insurance markets using taxpayer money. It is believed that this is the reason why Iowa and Oklahoma’s 2017 waiver requests were not approved.

Fortunately, the two waivers favored by the Otter administration are not the only options the state can consider. In another set of waivers, Idaho could follow the lead of states such as Kentucky and propose a set of bold, proven reforms that embrace personal responsibility and free-market principles.

One initial step Idaho should consider is a Medicaid enrollment freeze, which would temporarily prevent new enrollees while allowing those already in the program to remain. States that have implemented freezes have experienced drops in their Medicaid rolls through attrition and recipients moving out of the program as they find new and better jobs.

Second, Idaho should emulate Kentucky and join the growing group of states calling for the implementation of work requirements for able-bodied Medicaid recipients. Work requirements have proven to be successful in the past when introduced in other entitlement programs.

Applying more efficient models for providing and paying for health care – such as health savings accounts and direct primary care – to state Medicaid programs could offer recipients improved choice and access to care while reducing state Medicaid costs. These reforms would require HHS to approve a Section 1115 waiver.

Third, Idaho should submit a 1332 waiver that would exempt it from some or all of the 10 “essential health benefits” (EHBs) Obamacare requires for all non-grandfathered health insurance plans sold in the individual and small group Obamacare markets. Allowing states to waive or roll back certain EHBs would permit them to reduce Medicaid costs while allowing for the flexibility to determine what will be covered in states’ Medicaid programs. Otter has already signed an executive order on this issue, but it should be permanently codified by the legislature.

Idaho should also pursue a waiver that would end community rating requirements, which force healthy young people to pay higher premiums to cover those with higher health risks and costs, including the elderly and sick. Waiving these rules would dramatically reduce premiums and encourage young people to purchase insurance on their own.

Idaho has wisely taken the initiative to seek greater flexibility from burdensome federal rules and regulations, but it is important to make the right reforms – ones that will give Idaho the flexibility it needs to bring its Medicaid program under control.

The following documents examine Medicaid reform in greater detail.

Don’t Wait for Congress to Fix Health Care…/dont-wait-for-congress-to-fix-health-care
In this Policy Brief, Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services – a suggestion the Trump administration has encouraged.

States Can Take Control of Health Care Reform
This Policy Brief by Daniel Honchariw, a policy analyst at the Nevada Policy Research Institute, analyzes several potential changes to Medicaid and recommends patient-oriented solutions that are possible within the context of the existing law. The brief also outlines changes that state officials can make without federal approval.

Research & Commentary: States Pursue Work Requirements for Medicaid–commentary-states-pursue-work-requirements-for-medicaid?source=policybot
In this Research & Commentary, Senior Policy Analyst Matthew Glans examines efforts by several states to add work requirements to their Medicaid programs. “Implementing Medicaid work requirements would be a good first step for Medicaid-expansion and non-expansion states toward helping to limit the rising costs of Medicaid,” Glans wrote.

Kentucky Seeks Stricter Medicaid Work Requirements
Nathaniel Weixel of The Hill examines Kentucky’s new efforts to reform its Medicaid program. Kentucky lawmakers have asked the Centers for Medicare and Medicaid Services for permission to impose stricter work requirements for Medicaid beneficiaries. The new waiver request updates a previous request to overhaul the state’s Medicaid program.

The Oregon Experiment—Effects of Medicaid on Clinical Outcomes–effects-of-medicaid-on-clinical-outcomes?source=policybot
This article from The New England Journal of Medicine examines Medicaid outcomes in Oregon. Oregon gave researchers the opportunity to study the effects of being enrolled in Medicaid (compared to being uninsured) based on data from a randomized controlled trial – the “gold standard” of scientific research. The results showed no improvement in health for enrollees, but it did reveal better financial protections for patients and additional medical spending.

Why States Should Not Expand Medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over entitlement spending, allowing state lawmakers to better fit programs to states’ needs, resources, and budgets.

State ACA Waivers: A Bipartisan Solution
Joel M. Zinberg of the American Enterprise Institute discusses how state Affordable Care Act (ACA) waivers could be used to enact reforms in a way that would garner bipartisan support. “State Innovation Waivers are one of the few ACA policies with bipartisan support. They give states considerable flexibility in deciding how to achieve the ACA’s goals of expanding access to affordable care within their borders. Allowing states to experiment with different approaches will create a natural laboratory in which to assess what works and what does not,” wrote Zinberg.

Five Key Questions and Answers About Section 1115 Medicaid Waivers
This Issue Brief from the Kaiser Family Foundation provides an overview of what Section 1115 Medicaid waivers are, how they are approved and financed, how states have used them, and how they have impacted health care reform.

The Value of Introducing Work Requirements to Medicaid
Ben Gitis and Tara O’Neill Hayes of the American Action Forum examine the value of work requirements and argue more work requirements are needed in other safety-net programs, including in Medicaid.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.