Indiana Approach to Medicaid Expansion Limits Access to Needed Care

The “Indiana model” for Medicaid expansion has recently been held up as a possible alternative for Kentucky, with supporters arguing that Medicaid recipients should have more “skin in the game” by paying premiums and co-pays for services. However, such an approach could prevent low-income people from getting the care they need — making health problems costlier down the road and creating barriers to sustaining the health coverage gains Kentucky has made in recent years.

Kentucky’s Medicaid expansion has been very successful. It has provided health coverage for more than 400,000 low-income Kentuckians and contributed to the state’s dramatic drop in uninsured rates, from 20.4 percent in 2013 to an estimated 9 percent in the first half of 2015, according to Gallup. Many covered by Medicaid are utilizing preventive care services, which are expected to improve future health outcomes. For instance, in 2014 90,000 Medicaid expansion members received cholesterol screening and 80,000 expansion members had preventive dental care. This impressive uptake in preventive care is expected to help with Medicaid costs in the future as improvements in health occur due to problems being caught and treated early.

Indiana expanded Medicaid through a federal waiver that allows it to implement the expansion differently than other states. For instance, unlike most other states, Indiana’s waiver requires enrollees to pay a monthly premium and some co-pays. The program, called the Healthy Indiana Plan (HIP) 2.0, is unique to Indiana and has not been tried in other states. It builds on a waiver the state used to offer coverage to a small number of low-income residents prior to federal health reform.

HIP 2.0 functions as two different programs for Medicaid-eligible adults who are not elderly or disabled: HIP Plus, a program with few co-pays and more comprehensive benefits but a monthly premium, and HIP Basic, a program for those with incomes below the poverty line who are unable to afford HIP Plus’s premium payments. HIP Basic requires co-payments and provides more limited coverage.

HIP Plan 2.0 comparisonIndiana MedicaidSource: Indiana Family & Social Services Administration, “Healthy Indiana Plan 2.0,” presentation to state budget committee, June 20, 2014.

In order to enroll in the comprehensive coverage offered in HIP Plus, enrollees must pay a monthly premium ranging from $3 to $20 for those with incomes below the poverty line (below $11,670 a year in 2015 for an individual) and set at $25 for people with incomes between 100 and 138 percent of poverty (between $11,670 and $16,105 for an individual in 2015). This means parents in a family of four with incomes just above the poverty line, which is $23,850 for a family of four, would pay $50 a month ($25 for each adult) or $600 a year. Those with no income at all pay $1 a month for Medicaid coverage.

Unlike Kentucky’s Medicaid expansion, Indiana’s:

Locks people out of coverage if they are unable to pay. Those with incomes at or below the poverty line are locked out of HIP Plus if they miss a payment and don’t make it up within 60 days. For the period they are locked out, they are automatically enrolled in HIP Basic, a program with co-payments and fewer benefits (i.e., no vision and dental coverage). If they do not pay the initial premium, they will also be enrolled in HIP Basic, but they must wait 60 days.

Those with incomes between 100 and 138 percent of poverty who miss a payment and don’t make it up within 60 days are also locked out of the program for six months, but they do not qualify for HIP Basic and lose health coverage entirely for that period of time.

HIP Plus members from both income categories may also be responsible for medical debts if they are dropped from the program for failing to make a premium payment.

Does not provide retroactive health care coverage as traditional Medicaid does (for three months prior to application). Such coverage can prevent low-income persons with health problems from becoming buried in medical bills prior to enrollment in Medicaid. That component along with the potential loss of coverage mentioned previously threatens one of the most clearly measured benefits of expanding access to Medicaid: the reduction in catastrophic medical bills. This not only helps with medical bills for those who are uninsured — but has been beneficial for hospitals that have experienced significant drops in uncompensated care.

Does not cover non-emergency transportation to doctor’s appointments, which is covered by traditional Medicaid. Despite having health coverage, transportation is a barrier for many low-income persons who need medical care — especially if public transportation is not available or if a provider is not located close by. In most states, transportation assistance is provided through the Medicaid program for little to no cost to recipients.

Perhaps most importantly, the added cost in the form of premiums and co-pays for very low-income Kentuckians is likely to inhibit access to health care that is the main goal of Medicaid expansion.

In Indiana, those unable to afford monthly premiums are likely not able to afford co-pays they would then have to pay at doctors’ visits. Some will respond by making fewer preventive care appointments and waiting longer to seek care for potentially serious conditions, leading to poorer health outcomes. The more limited coverage of those who can’t afford premiums includes the loss of vision and dental coverage, which means additional health problems can go untreated. Having to provide transportation for doctors’ appointments would also be a significant challenge for some.

According to an extensive body of research, premiums create a barrier for health coverage for many low-income individuals — especially those below the poverty line. For instance, Oregon received approval in 2003 to increase the premiums it charged participants in its Medicaid waiver program and also impose a six month lock-out period for non-payment of premiums; a study found that following these changes, enrollment in the program dropped by almost half. Similar effects occurred with programs in Utah, Washington and Wisconsin.

It is likely that imposing premiums on beneficiaries would lead to fewer low-income Kentuckians enrolling in health coverage at all. The HIP 2.0 model may be even more expensive for some than buying health insurance coverage with the help of tax credits through Kynect, the health insurance marketplace. Meanwhile, given the modest cost-sharing amounts involved, the administrative cost of collecting premiums and co-payments may end up approaching or exceeding the amount collected. Additionally, if drops in preventive care occurred the state would miss out on related health care cost savings due to unmanaged health conditions.

Through the Medicaid expansion and Kynect, Kentucky has made tremendous progress in reducing the number of uninsured and providing greater access to preventive care that can improve health outcomes down the road while providing economic benefits to the state. Before seriously considering an alternative model for Medicaid expansion, Kentucky should closely watch the impact in states like Indiana. Given Kentucky’s success so far, a new model would have a lot to prove.

Visual: Medicaid Expansion Helps, Not Hurts, State Budget

Through the Affordable Care Act (ACA), Kentucky expanded Medicaid eligibility to those with incomes up to 138 percent of the poverty line — or $32,900 for a family of four in 2014. More than 310,000 Kentuckians were enrolled in the Medicaid expansion by the end of 2014. According to an independent study, the expansion will help create jobs, new tax revenue and significant savings in the state budget, as shown below. You can read a more detailed analysis of the study here.

Independent Study Says Medicaid Expansion a Good Deal for Kentucky’s Economy

In recent months, some have expressed concern that the cost of Kentucky’s Medicaid expansion may exceed its benefits—especially in light of greater than expected participation by low-income Kentuckians. However, a new independent report from Deloitte and the University of Louisville’s Urban Studies Institute shows that a net positive fiscal benefit to Kentucky is still anticipated because greater enrollment also means higher than projected job creation from more federal dollars flowing in to the state.

The report shows that a total of 310,000 Kentuckians enrolled in the Medicaid expansion in 2014 (compared to initial projections of 147,634), and the expansion is now estimated to have a positive cumulative impact of $30.1 billion on the state’s economy through 2021 (the original projection was $15.6 billion). The net cumulative impact on the budget is also positive over the first eight years—becoming only slightly negative in 2021 when the state’s share is fully phased in at $45 million net costs.

The $30.1 billion positive economic impact between 2014 and 2021 largely results from:

Increased Revenues for Healthcare Providers – There were $1.16 billion in new Medicaid revenues to healthcare providers just in 2014—with $506.6 million going to hospitals alone.

Job Growth – One of the most important impacts of the Medicaid expansion is the resulting growth in jobs. The report estimates that the expansion resulted in 12,000 new jobs in Kentucky in 2014 due to related spending—and 5,400 of them were healthcare sector jobs. Through 2021 more than 40,000 jobs are expected to be created, resulting in more than $1 billion in income, sales and occupational tax revenues over the next eight years.

Federal Funds Replacing Some General Fund Dollars – The Medicaid expansion has enabled General Fund budget reductions to several state agencies—Department for Public Health; Department for Behavioral Health, Developmental and Intellectual Disabilities; and Department of Corrections—because under expanded Medicaid some of the costs are covered by federal money. For instance, adults under 138 percent of the Federal Poverty Level can now receive medical treatment at local health departments through Medicaid rather than exclusively through General Fund dollars.

Reduction of State and Local Expenditures for Uncompensated Care – The Quality Care Charity Trust Fund (QCCT) at the University of Louisville Hospital has been in place—and funded by the state, local government and university—to cover the medical expenses of those who cannot afford to pay for their care. Budgeted contributions to the QCCT are now being reduced because of the Medicaid expansion’s coverage of more low-income Kentuckians.

uncompensated care graph 2015

Source: Deloitte, “Commonwealth of Kentucky Medicaid Expansion Report 2014.”

Avoiding $99.5 Million Cost to the State of Not Expanding – The report makes the point that it would cost the state money not to expand, noting that “without Medicaid expansion, the state may not experience some of the near-term direct costs associated with the Medicaid expansion population, but the result of such a decision could be the forfeiture of the economic benefits associated with increased jobs and tax revenue.”

Of course, in addition to the Medicaid expansion’s direct economic payoff, expanded health coverage can be expected to improve the health of the population as well. However, the estimates in the report do not take into account the potential economic benefits of improved health through increased coverage.

Kentucky’s decision to expand Medicaid has played an important role in the state’s uninsurance rate dropping so substantially—according to Gallup, from 20.4 percent in 2013 to 11.9 percent in mid-2014, the second largest drop in the nation. In addition to the 310,000 Kentuckians enrolled in Medicaid in 2014 through the expansion, an additional 36,702 enrolled in Medicaid under the traditional (pre-expansion) qualification guidelines.

The report also shows that participants in Kentucky’s Medicaid expansion are seeking out preventive care, which will likely positively impact health outcomes. For instance, in 2014:

  • 232,000 members had a non-annual physician office visit;
  • 90,000 members received cholesterol screening;
  • 80,000 members received preventive dental services;
  • 46,000 members participated in diabetes screening;
  • 34,000 members had cervical cancer screening;
  • 26,000 members had breast cancer screening.

And the report indicates that the Medicaid expansion is providing better access to substance abuse treatment in our state. A least 13,000 people with a substance use disorder diagnosis have received treatment services, and more than 300 new behavioral health providers have enrolled in Medicaid.

The new study of the state’s Medicaid expansion more than confirms that it was a smart move for Kentucky. The analysis overwhelmingly shows that the expansion is proving to be good for the state’s economy as well as the health of its citizens.

Evidence of Benefits of Medicaid Expansion Starting to Come In

Kentucky is starting to see the benefits of its decision to expand Medicaid through the Affordable Care Act (ACA) in dramatic reductions in the number of uninsured across Kentucky counties and increased use of preventive care services, according to a recent presentation to the Interim Joint Committee on Health and Welfare by Kentucky Medicaid Commissioner Lawrence Kissner.

As seen in the maps below, the ACA has substantially increased the share of Kentuckians with insurance all across the state. In 2012, 75 Kentucky counties had uninsurance rates of at least 17 percent—with 11 of these counties greater than 20 percent. Now, according to Commissioner Kissner, there are potentially no counties with uninsurance rates above 17 percent—and just two counties that fall into the category of 14 to 17 percent of the population being uninsured. The maps indicate that in several southeast Kentucky counties where more than 17 percent of the population was previously uninsured, the uninsured rate may have fallen to less than 5 percent. medicaid expansion map 2012 medicaid expansion map after implementation Source: Lawrence Kissner, “ACA Update,” presentation to the Interim Joint Committee on Health and Welfare July 16, 2014.

Medicaid has also seen increased use of preventive care and screening, which could play an important role in improving the state’s health in the future. According to Commissioner Kissner, in the past year the utilization of an annual dental visit through Medicaid increased by 15.8 percent. Use of adult preventive services increased by 36.7 percent; breast cancer screening increased by 20.6 percent; cervical cancer screening increased by 3 percent; and colorectal cancer screening increased by 16.1 percent.

Commissioner Kissner’s presentation also helps make clear how important Medicaid is as an often temporary safety net for individuals and families in Kentucky struggling to make ends meet. His presentation notes that the state’s Medicaid program experiences a lot of “churn”—there is a consistent influx of new members but a roughly equivalent number who leave the program each year. For instance, only 81 percent of the individuals enrolled in Medicaid in Kentucky in June of 2012 were still enrolled in June of 2013. 151,424 persons had left the program and had been replaced by 153,822 new individuals. Going back to June 2011, only 70 percent of members were enrolled in Medicaid all three years. With Medicaid expansion, more Kentuckians will have the financial and health security that Medicaid provides when they fall on hard economic times, and as they struggle to get back on their feet.