Gov. Pence gets federal OK for Medicaid alternative

After months of wrangling between Gov. Mike Pence and the Obama administration, Indiana won approval to expand its own brand of Medicaid that injects personal responsibility into the healthcare program for the poor.

About 350,000 low-income Hoosiers who lack insurance could benefit from the program, whose approved expansion was announced Tuesday, the day enrollment began. Coverage could start as early as Feb. 1.

Pence said the Healthy Indiana Plan 2.0, a revamped version of a program started by then-Gov. Mitch Daniels, goes beyond standard Medicaid expansion by requiring that participants contribute to the cost of their care.

"I believe Medicaid is not a program we should expand. It's a program that we should reform – and that's exactly what we're accomplishing," Pence said Tuesday at a speech at St. Vincent Health, announcing the plan's approval. "HIP 2.0 is not intended to be a long-term entitlement program. It's intended to be a safety net that aligns incentives with human aspirations."

With the approval, Indiana becomes the 28th state to expand Medicaid, along with the District of Columbia, and the fifth to receive a waiver. While Pence touts HIP 2.0 as a unique program, both Iowa and Michigan require some form of a monthly contribution, although how they do so differs.

But none of these other states' programs has gone quite as far as Indiana when it comes to pushing the personal responsibility piece, experts say.

That could make Indiana a model for other states that have dragged their heels thus far.

"What other states will probably look at is how far is the federal government willing to go now," said Kosali Simon, a professor at the School of Public and Environmental Affairs at Indiana University Bloomington. "Indiana will be a key state to watch; they are the ones that the federal government had pushed the envelope the farthest."

The Affordable Care Act, also known as Obamacare, offered states incentives to expand traditional Medicaid programs to those with incomes 138 percent and below of the federal poverty level, about $2,743 a month or less for a family of four.

But many states, including Indiana, opted not to do that.

In Indiana an estimated 350,000 fell into what was known as a coverage gap – with an income above the Medicaid cutoff but still below 100 percent of the poverty level, meaning they likely could not afford to buy insurance on the healthcare marketplace.

Another 150,000 individuals, who fall between 100 and 138 percent of the federal poverty level, may have been able to purchase income on the health insurance marketplace, through some of the subsidies that the ACA provided. These individuals are now being told they must transfer to the Healthy Indiana Plan or face tax penalties.

About 120,000 non-disabled Indiana residents on Medicaid will also join the Healthy Indiana Plan, as well as the 60,000 or so who already receive coverage through the program.

Everyone on the Healthy Indiana Plan will be required to make a contribution ranging from $1 to about $27 per month, depending on income. This money, which amounts to about 2 percent of family income, funds a $2,500 Personal Wellness and Responsibility, or POWER, account, which functions like a Health Savings Account.

Some have criticized the program for forcing low-income people to chip in for their care and have suggested that the Obama administration may have given Indiana too much leeway.

Those who are eligible for the plan already live at the poverty level, said Timothy Jost, a law professor at Washington and Lee University and a healthcare reform expert. People who by definition are already having trouble covering basic costs such as food and rent will struggle to make an addition payment. Instead, they may opt not to participate in the program or avoid getting care.

"The question is how far is CMS willing to go in accommodating governors or states that want to work their own policy agenda into the Medicaid program," Jost said. "This is pretty much pushing the limits of how far they should go if it's not beyond it."

Throughout the months of back and forth with federal health officials, Pence had said he was not willing to compromise on the personal responsibility piece.

Granting Indiana a waiver shows the Obama administration's willingness to be flexible, said Joan Alker, an expert on Medicaid waivers at the Georgetown Center for Children and Families, "because they want states to get to `yes.'"

But the result, Alker said, is a program that "wins the award for bureaucratic complexity and red tape."

That's because different rules and benefits apply depending on if a recipient's income is above or below poverty, whether they're in the "HIP Plus" program that requires monthly contributions, or the "HIP Basic" that doesn't but that includes co-payments.

Everyone enrolls at first in the HIP Plus program. But if a person whose income is 100 percent or below the federal poverty level who does not make his or her required payments will be downgraded to the Basic plan that requires co-payments for all services and limits benefits.

"The concept that the governor is trying to promote personal responsibility for low-income people by constructing this enormously complicated bureaucratic maze for them to wind their way through is troubling to me," Alker said. "The good news is that Indiana is extending coverage…(but) I'm guessing that the enrollment will not be as robust as in a state that did a straight-up expansion."

The Obama administration made only a few modifications to Indiana's proposal. They reduced from $3 to $1 the minimum monthly contribution for someone at the lowest income levels. And the administration included some exceptions for the 6-month lockout period for people above poverty who don't pay their monthly contributions.

The waiver comes with federal funding to pay for nearly all of the cost. The state plans to offset its $1.6 billion share with revenue from the cigarette tax and a hospital assessment fee. The expansion also includes a 25 percent increase in reimbursement for current Medicaid providers to near Medicare rates in an attempt to improve access.

Hospitals did not object to the fee because they figured they would be more than earning it back by no longer having to provide charity care to those who would now be insured under the Healthy Indiana Plan, said Douglas Leonard, president of the Indiana Hospital Association.

"When it was all sort of drawn out where you could see what the return on the assessment was. You're paying in this much but you have an opportunity to earn back this much," Leonard said. "It's the right clinical thing to do and ultimately I think that it's the moral thing to do."

It's not as clear, however, whether it's the right political move for Pence — or how much it will help him should he decide to seek the GOP nomination for president in 2016.

Some conservatives consider federal approval of the program a big win for Pence, who continues to call for the repeal of Obamacare.

But other conservative groups have criticized Pence for being willing to expand Medicaid in any form.

Chase Downham, Indiana state director of Americans for Prosperity, said he agrees that Medicaid needs to be overhauled but that "should not come at the cost of expanding an already troubled entitlement program to include hundreds of thousands of able-bodied, working-aged, childless adults."

"Hoosiers believe in the dignity of work and desire the prosperity that comes with a job opportunity, not more government-funded health care," Downham said.

Charlie Black, a veteran GOP strategist, said conservative governors "have been all over the place" on Medicaid expansion.

"Some conservative governors have turned it down, but I don't think it's a clear cut ideological marker," Black said. "If Gov. Pence has figured out ways to put some competitive features and individual responsibility into it, it's probably a pretty good program."

Shirley Hale certainly thinks so. The Southeastside resident lost her job as a certified nursing aide and with it insurance. The plans available on the insurance marketplace were beyond her means. Hale, 57, worried about what would happen should she fall ill.

Recently she applied for the Healthy Indiana Plan. A year ago she likely would not have been accepted. But on Tuesday Hale made a cameo in Pence's speech announcing the program.

And she said she, for one, has no objections to making small payments towards insurance.

"I have always worked my whole life," she said. "I will find some way to pay."

Call Star reporter Shari Rudavsky at (317) 444-6354. Follow her on Twitter: @srudavsky.

For information on how to enroll in the Healthy Indiana Plan, visit www.HIP.IN.gov or call 1-877-GET-HIP-9.