Indiana Medicaid model unsound, not a good model for NC

In 2007, the federal government granted Indiana and then-Gov. Mitch Daniels a waiver to administer Medicaid to an expanded population.Indiana launched the Healthy Indiana Plan in 2008 with a five-year federal waiver. 

HIP was to be the nation’s first consumer-directed health plan for low-income residents. The intent was to encourage personal responsibility and accountability. 

But it has not worked as planned. Other states, including North Carolina, should heed the warnings and not use Indiana as a model for Medicaid expansion.

There were two HIP versions. The first HIP, enacted under Daniels, actually was more generous because it extended eligibility to low income parents and childless adults with incomes up to 200% of the federal poverty line. There was a cap on childless adults who could join the program.

The second version (HIP 2.0), enacted during the tenure of Gov. Mike Pence, adopted Medicaid expansion eligibility guidelines in Obamacare, covering people  from 0-138% of the FPL. Many low income parents and adults who were once on HIP 1.0 transitioned to marketplace coverage (people between 100-138% of the FPL). HIP 2.0 was adopted in 2015.

Under HIP 2.0, the first $2,500 of medical expenses for eligible services were covered by a special savings account called POWER, for Personal Wellness and Responsibility. Every HIP member has a POWER Account. The enrollee shares those costs, capped at 2% of their income or about $25 per month. The federal government allowed Indiana to lock out enrollees with incomes between 100-138% FPL for six months if they didn’t pay the premium.

Even with the “required” contribution, the state winds up paying most of the $2,500 for enrollees. There are a lot of opt-out waivers and the state often fails to check the income eligibility of enrollees.

Additional provisions have been added to the original HIP, including a work requirement, wellness incentives, and dental, vision, and chiropractic services. 

When Pence announced the plan, he anticipated about 350,000 uninsured residents would be covered. Instead, 650,000 Indiana residents are eligible for the current version, HIP 2.0.

As of 2015, taxpayers have ended up funding about 95% of the HSA-like accounts.

Only 10% of HIP 2.0 (including the Medicaid expansion population) had incomes above the poverty line and were required to make the 2% monthly premium payment. The other 90% of new enrollees haven’t had to pay anything.

Even among the 10% who are supposed to pay, so many exemptions are in place that a mere 0.2% of enrollees have been kicked off Medicaid for failure to pay.

As a result, taxpayers are paying more. State actuaries project that the HIP 2.0 will actually cost $366 million more in the first year than it would have if they’d just done a traditional Medicaid expansion.

Indiana increased costs again by increasing optional benefits beyond the standard Medicaid package. People living below 100% of the federal poverty level have the choice of paying $3 to $15 a month, depending on income, to obtain dental or vision coverage. North Carolina’s Medicaid already covers dental and vision.

Indiana is expected to spend $1.5 billion on the plan by 2020, paid with cigarette taxes and money from a hospital assessment fee program (which will be passed on to patients or through higher insurance premiums).

As we’ve seen in other expansion states, loosening eligibility requirements and lax oversight has expanded Medicaid so much that it’s no longer a safety net program for the most vulnerable. Instead, it’s a taxpayer-funded health insurance program for many who could pay their own way.

As Senate leader Phil Berger, R-Rockingham, said recently of Gov. Roy Cooper’s insistence on holding up the state budget in exchange for Medicaid expansion in North Carolina: “A full accounting of the facts leads to the inescapable conclusion that expanding Medicaid would be a mistake that not only will fail to solve the problems its proponents claim it solves, but will create new problems and rekindle problems that have just recently been put to rest — such as Medicaid cost overruns and yearly budget deficits.”

Public programs of this magnitude are hard to control. They increase costs and reduce access. They put the vulnerable populations Medicaid was designed to serve at greater risk. 

North Carolina has about 2.1 million Medicaid enrollees. Medicaid covers one of every two babies born in the state. Adding an anticipated 643,000 additional participants (and in every case, the actual enrollment is higher than anticipated) on an already overloaded, fragile program is irresponsible.

The better way to go is by lowering the costs of health care, and reducing mandates and other government regulations making health policies needlessly expensive, so people can afford the health insurance that best fits their needs, not what the government decides to hand them.