Under Trump, Indiana May Export Free Market Medicaid Expansion

Seema Verma, the presumptive next administrator of the Centers for Medicare & Medicaid Services, is the architect of Indiana's free market-based Medicaid waiver program. Hospital executives in the Hoosier State believe it could be easily adopted elsewhere.

This is part of a series covering the Shaping of Healthcare's Future in the Trump era.

It is no small irony that the Medicaid expansion envisioned under the Affordable Care Act may come to fruition in many of the remaining 19 non-expansion states only after the man who's pledged to repeal Obamacare takes office.

Elected leaders in these 19 Medicaid non-expansion states have refused billions of dollars in federal funding to expand the program because of ideological and political reasons.

They object to what they see as the government's increasingly intrusive role in providing and paying for healthcare under a program that they believe is unsustainable, and they don't want to help Democrats enable Obamacare.

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Those objections could evaporate when President-elect Donald Trump's nominee Seema Verma becomes administrator of the Centers for Medicare & Medicaid Services.

Verma, a private sector consultant from Indianapolis, has built a strong resume as a conservative policy wonk, primarily because of her use of free-market principles to craft the Healthy Indiana Program 2.0, or HIP 2.0, a three-year Medicaid demonstration project, at the behest of Republican Gov. Mike Pence, the vice president-elect.

"In a sense HIP 2.0 is not much different from any commercial plan with high deductibles and requirements for patient participation," says Doug Leonard, president of the Indiana Hospital Association.

Leonard says Indiana hospitals were surprised and pleased that Pence, an avowed opponent of the ACA, came to support Medicaid expansion, but only on his terms.

"Being a very conservative governor, he stated frequently his opposition to the ACA. We didn't anticipate his willingness to consider the coverage expansion," Leonard says.

"It wasn't until about 18 months into his administration that he told us he would consider Medicaid expansion, but it would have to occur through the HIP model because he felt that Medicaid was broken and he was unwilling to see traditional Medicaid expanded."

Key provisions of HIP 2.0 include copays for enrollees, who are also required to establish health savings accounts. As the federal match declines in the coming years, Indiana's hospitals will face an enhanced assessment to pay for the state's portion of the expansion costs, thus keeping the program budget neutral for the state's general fund.

No one in Indiana argues that the program isn't needed. The American Public Health Association and the United Health Foundation placed Indiana at No. 39 on their 2016 state rankings of population health, with a high prevalence of obesity, smoking and cardiovascular disease.

More than 407,000 Indianans were enrolled in the plan in June, 2016, which represents about 70% of the eligible enrollees in the state. About 60% of enrollees had no coverage prior to HIP 2.0, and the plan pays doctors at Medicare rates, or 130% of the Medicaid rate, according to data from Indiana's Families and Social Services Administration.

"There were characteristics of HIP that the governor felt would resonate with conservatives on certain issues and would provide a benefit to many uninsured in Indiana," Leonard says. "Enrollees must adhere to personal accountability and being at-risk for making good choices, such as not overusing an emergency department, and paying a premium."

Hospitals Back HIP 2.0
From the hospital perspective, Leonard says HIP 2.0 has been a success.

"Hospitals received zero from these patients before and now there is insurance available," he says. "If there are headaches along the way, they are relatively minimal compared to the fact that hospitals are getting paid now for a service that they weren't getting paid for before."

Tim Putnam, CEO of Margaret Mary Health in Batesville, IN, says HIP 2.0 came on line as the state's healthcare delivery system was undergoing a dramatic change.

"We've been transitioning from volume to value and trying to keep people healthy without having access to care. That was always difficult because their fallback when they become seriously ill was the emergency department, which was counter to what our real goal was," Putnam says.

"Once HIP 2.0 became available we started seeing people getting primary care physicians, vaccines, early treatment, before it became an emergency department issue. It definitely had a positive financial impact but I can't tell you exactly what that number is. We looked at it more from people having access to care."

Putnam says HIP 2.0 allowed Margaret Mary to find health insurance coverage for people who'd never before need covered.

"We saw it was the working poor; a childless adult with a minimum wage job, or working part-time; a young family where two people are working, one may be part-time, or low income with young children and they qualify for HIP, which we saw as better coverage than Medicaid," he says.

"It gave options for people who really didn't have options before, or where health insurance wasn't affordable this was a great option. We had a lot of people who before had fallen through the cracks, who needed health insurance, now have it."

The main problem with HIP 2.0, Putnam says, is that it can be complex and difficult to understand, especially for people who've never before had health insurance.

"People understand traditional Medicaid. Here is your coverage. You don't pay anything for it and this is what you get," he says. "HIP 2.0 had a lot of components. You had to make payments. There was a basic plan if you didn't make payments, that didn't have as robust a coverage but was some sort of coverage. There is a saving account component, all of which were good things but were a challenge to explain to people. Once they understood it they saw the value in it, but it was cumbersome."

Verma's Model Plan
Putnam and Leonard believe that HIP 2.0 could succeed in other states.

"Gov. Pence found a way to not compromise his conservative ideology but still find a way to provide coverage," Leonard says. "That is commendable because there are many states where because of ideological concerns the governors have said absolutely not. The state has suffered from losing the opportunity for a federal match, and there are a lot of measures that have shown that states that have expanded Medicaid have derived a lot of benefits."

Putnam recalls speaking with Pence a few years back when the governor was barnstorming to promote HIP 2.0.

"He was genuine in his desire to find a solution to expanding care to these people, but not doing it through an entitlement program like Medicaid, that he felt was not an efficient and effective program," Putnam says.

"When I look at my colleagues in states that wouldn't and didn't consider options to expand Medicaid and the downstream negative effect from that, I was very pleased with what Indiana attempted to do, and put in place."

"It can be successful in other places," Putnam says.

"It's a little cumbersome. It requires people to have a financial commitment and investment, but there is enough flexibility in the program in Indiana to allow organizations such as United Way to help individuals gain access, to help them become educated on what their involvement in paying for healthcare is, so there has been that flexibility."

Putnam says HIP 2.0 is a credit to Pence and Verma, who could have played it safe and sat on their hands.

"It would have been easy to act like other states and refuse to expand Medicaid, but they worked hard to find a solution," he says.

"I saw that as we went through each iteration, that there was a genuine effort to find a way to expand care to people who needed it and do it in a way that not only was received well by the people who get the healthcare, but also by the physicians and other providers who were required to sign up for it."