INDIANAPOLIS – About 350,000 uninsured Hoosiers would be eligible for health coverage under a plan proposed Thursday by Gov. Mike Pence, but they would have to pitch in to cover the cost.
“I'm pleased to announce today that the state of Indiana will seek flexibility from the federal government to close the coverage gap by expanding our own homegrown health care solution – the Healthy Indiana Plan,” he said.
The program, dubbed HIP 2.0, still has a major hurdle before it could go into effect next year – the federal Centers for Medicare and Medicaid Services would have to approve a waiver.
That would allow Indiana to reap billions in federal dollars from the Affordable Care Act and for Pence to win a battle for consumer-driven health care in Indiana.
Pence is hopeful the approval will come after what he described as productive and constructive discussions.
The governor announced his plan publicly Thursday morning in Indianapolis and also spoke in Fort Wayne.
He has resisted an expansion of traditional Medicaid covering poor Hoosiers, instead hoping to use the state's Healthy Indiana Plan as a vehicle.
Pence claims HIP has lower emergency room rates than Medicaid and users take advantage of preventive care and more generic drugs.
“(Medicaid) has morphed into a bureaucratic and fiscal monstrosity that does less to help low-income people than its advocates claim,” he said.
Healthy Indiana Plan's key feature is a cost-sharing component that requires those covered to contribute to a health savings plan called a POWER account.
The state's share of the cost during fiscal years 2015 through 2021 is expected to be about $1.6 billion. Of that, about $670 million comes from cigarette tax revenue, which is used to fund the existing Healthy Indiana Plan. And about $1 billion comes from an increased hospital assessment fee.
The total cost of the six-year program is estimated to be $18 billion, with the federal share being about $16.5 billion.
Rep. Ed Delaney, D-Indianapolis, said he is happy to see Pence ready to take the federal money offered to cover Hoosiers.
“We're going to do our own thing with it. And if we learn something positive about whether these accounts work and whether this rather complex method of providing care works, then great; I'm all for it,” he said. “I just think a fundamental choice was made that we're going to try to cover people rather than thumb our nose at Washington and I'm glad.”
There are pros and cons to the proposal. The obvious advantage is that it would provide some health care coverage to hundreds of thousands of Hoosiers in a gap right now.
Traditional Medicaid in Indiana currently covers people earning up to 22 percent of the federal poverty level.
Many states have expanded Medicaid under the Affordable Care Act to cover those making up to 138 percent of the federal poverty level – $16,105 for individuals and $32,913 for a family of four. Participants in the program pay nothing for the services.
Those between 100 percent and 400 percent of the federal poverty level can access tax credits to help them pay for health insurance through the federal exchange.
Because Indiana has declined to expand Medicaid, it has left hundreds of thousands of people between 22 percent and 100 percent of the federal poverty level with no coverage options.
The Pence administration has been in negotiations with the Centers for Medicare and Medicaid Services for months, and the one clear deal breaker for the federal government for a possible waiver was that Indiana could not end coverage for someone who doesn't contribute to the health savings account.
That led Indiana officials to create a two-tier program. Both plans meet minimum requirements required by the Affordable Care Act but one is more generous than the other.
Anyone below 100 percent of the federal poverty line would be placed in the HIP Plus plan. This requires a monthly contribution to the POWER account of between $3 and $25 depending on income. It also provides access to dental and vision coverage, less treatment limitations, a better prescription plan and no co-pays.
But if a person doesn't pay the monthly contribution, they get defaulted to the HIP Basic plan, which has reduced benefits, more prescription restrictions and no dental or vision coverage. Most importantly, it requires co-pays for all health care services except preventive and family-planning services.
Those between 100 percent and 138 percent go to HIP Plus automatically. If they don't make their monthly contribution, their coverage is suspended for six months. There is no access to the basic plan in this income level.
“HIP is not intended to be an entitlement,” Pence said. “It is a safety-net program that aligns incentives with human aspirations.”
Officials are trying to reward people for contributing to their health care, something Delaney agreed with.
“What I think is great about this cost-sharing is it has positive incentives. You can't be thrown off, but if you don't pay your part you get less coverage. That is a core change, and it sends a great message,” he said.
One group hurt by the proposal is non-disabled Hoosiers, 130,000 of whom are on Medicaid. They would automatically be transferred to HIP Basic or Plus. That means they would have to either cover co-pays or monthly contributions when they now pay nothing.
One key feature in the plan is a termination clause that says if Congress reduces money provided by the Affordable Care Act or the continuation of the hospital assessment fee during the five-year waiver period, the HIP 2.0 program will automatically terminate.
The waiver proposal was posted Thursday, starting a 30-day comment period that includes two public hearings in Indianapolis this month. Then Indiana will formally submit a final application to the Centers for Medicare and Medicaid Services, which has no deadline to decide.