For the last six years, the Healthy Indiana Plan (HIP) has delivered quality care, encouraged the use of preventive services, and received measurable results. By incorporating the essence of a high deductible health plan and health savings account (HSA), the Medicaid expansion project became the first in the nation to adopt – and successfully demonstrate – the linkage of personal responsibility with subsided health protection to low-income individuals.
Altering Medicaid norms
In 2006, Mitchell Roob, the former Secretary of Indiana’s Family and Social Services Administration, and Seema Verma, the Head of Health and Human Services and former President and CEO of SVC, Inc., were asked by Governor Mitch Daniels and the Indiana General Assembly to establish a health plan for Indiana’s working poor and chronically uninsured. In little over a year, Indiana had passed legislation, negotiated a Federal 1115 waiver, and implemented a plan to expand coverage. By January 2008, Indiana would become the first state to implement private market-based consumer reforms and begin enrolling adults into its newest program, the Healthy Indiana Plan (HIP) 1.0.
Later in 2013, the state obtained a one-year waiver extension from the Centers for Medicare and Medicaid Services (CMS), extending the plan and amending coverage eligibility. During HIP 1.0’s operation, the program helped to improve the status of its Medicaid beneficiaries. Its results demonstrated that members sought to become healthier and increase both their involvement and engagement with their care.
Following two years of negotiations, Governor Pence and the Obama Administration reached an agreement in 2015, granting Indiana a waiver to form its own Medicaid Expansion, known as Healthy Indiana Plan (HIP) 2.0. Through this measure, the state would gain access to federal funding through the Affordable Care Act (ACA) to cover people between 100 and 138 percent of the poverty line.
Since its debut, HIP 2.0 has worked to assign efforts among numerous health insurance coverage types. Today, HIP 2.0 covers more than 400,000 Medicaid beneficiaries and has been viewed as a model for other states’ Medicaid reform activities. The program also contributed to a decline in emergency department and inpatient utilization. As of April 2016, the program saw 30 percent lower emergency room (ER) use and a 58 percent drop in inpatient utilization under HIP, when compared to traditional Medicaid.
The plan, which was established with a Medicaid waiver, has remained budget neutral; the federal government creates a per-capita cap on federal funds for Healthy Indiana Plan expansion enrollees and others covered through Medicaid including pregnant women, children, and parents.
Skin in the game
HIP 2.0 is an innovative approach to Medicaid, which drives consumer engagement by incorporating aspects such as program and benefit design and monetary and non-monetary incentives. Warren Buffett’s famously-coined term, “skin in the game,” commonly describes a situation where insiders use their own money to buy stock, and Indiana HIP’s practices resemble this spirit.
HIP 2.0 contains two coverage tiers: Basic and Plus. Basic is only open to members below 100 percent FPL, while Plus is open to all Members. Plus has more coverage and benefits, along with dental, vision, and more. Plus requires that members make monthly, income-based contributions to their personal wellness and responsibility (POWER) account, which acts like a health savings account to pay for deductible expenses.
Members are encouraged to make monthly contributions to their POWER Accounts. These contributions — called POWER Account Contributions or “PAC” — are indexed to two percent of a member’s household income, with a minimum contribution of $1 per month and a maximum contribution of $100 per month. Unlike traditional Medicaid, missed payments can result in a six-month lockout from insurance coverage. Through this approach, members take on a true sense of responsibility for their care and coverage.
Providing states with flexibility to expand Medicaid
Section 1115 demonstrations have been adopted by states to test new and existing ways of delivering and paying for health care services in Medicaid. By providing flexibility to states, the Secretary of Health and Human Services (HHS) may afford states with the flexibility needed to relinquish certain Medicaid Law provisions and the option to design or improve their programs, using approved experimental, pilot, or demonstration projects.
33 states (including D.C.) have adopted Medicaid approaches, while another 18 have elected to wait. Of the states that expanded their programs, a total of 7 – Arkansas, Arizona, Iowa, Michigan, Indiana, New Hampshire, and Montana – have employed section 1115 waivers.
Such waivers have been employed to expand Medicaid and/or the Children’s Health Insurance Program (CHIP), provide individuals with services that have not traditionally been covered by Medicaid, and to improve care, increase efficiency, and reduce costs through establishing innovative service delivery systems.
Gateway to Work program
Just last week, Alex Azar, Secretary of Health and Human Services, granted Indiana permission to add work requirements to its Medicaid program. In doing so, Indiana and Kentucky have become the first in the nation to link health coverage to employment for certain low-income enrollees. Indiana had previously attempted to encourage Medicaid recipients to find employment through the Gateway to Work program.
This formerly voluntary program did not see much success, though. Out of 358,342 letters mailed to encourage participation, only 0.2% of beneficiaries responded and attended program orientations. Now, through the new waiver initiative, the state is giving MCOs the responsibility to develop incentive programs for members who are unemployed or work less than 20 hours a week. The state will be closely monitoring progress and investigating whether the incentive programs improve participation in Gateway to Health.
According to Azar, “There is a robust body of academic evidence to show that work is a key component of well-being,” Azar said. “This in particular is going to help open new opportunities for a lot of Hoosiers.”
The approval comes just weeks after President Trump issued guidelines, encouraging states to impose the first-ever employment-based restrictions in the Medicaid program’s 53-year history.
Does HIP 2.0 have national aspirations?
HIP 2.0 has proven to be a successful endeavor for the State of Indiana. In doing so, it has become an inspiration for the redesigning of other state Medicaid programs, including the Medicaid Expansion proposals for Iowa, Ohio, and Kentucky, which Seema Verma also helped to establish. In addition, the Healthy Indiana Plan (HIP) is viewed as a model for New York and Minnesota’s Basic Health Program (BHP), as well as Arkansas’ Private Option.
President Trump’s selection of Seema Verma, Healthy Indiana Plan’s architect, to serve as the Administrator of the Centers for Medicare and Medicaid Services (CMS) may reveal some insight on what’s to come during the 4-year term. Verma’s selection raises some important questions. For instance, what does this mean for Medicaid expansion? Will she prove that her approach to expanding Medicaid can work on a national scale? According to Patricia Miller, a former Republican member of the Indiana State Senate, “we will begin to see a trend of the federal government turning toward the Indiana HIP plan.”
President Trump has indicated his desire to provide more control to states for running their Medicaid programs and has shown a strong interest in establishing heath-savings accounts, like Indiana’s POWER Accounts. Reforming Medicaid using contribution accounts, like health reimbursement arrangements (HRAs) may be a viable option, especially following the passage of the Small Business Healthcare Relief Act (SBHRA). The new legislation establishes Qualified Small Employer Health Reimbursement Arrangements that are designed to assist employees with out-of-pocket health insurance and medical costs, which were formerly banned by the Affordable Care Act.
Healthy Indiana Plan (HIP) may serve as a model for replacing the Affordable Care Act, demonstrating how states can increase their population’s access to care, encourage members to have a more active role in health care, and “align incentives with human aspirations,” as Pence stated.
Where are the states today?
Earlier this year, we examined a major shift involving states’ proposals to impose work requirements for Medicaid recipients through section 1115 waivers. The move, which was announced by the Trump Administration on January 11, would affect nearly 70 million low-income people receiving benefits.
Ten states – Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, New Hampshire, North Carolina, Utah, and Wisconsin – have already sent in proposals to add work requirements for Medicaid, according to CMS. On January 12, Kentucky became the first to gain CMS approval quickly followed by Indiana. Mississippi has also submitted a waiver proposal to CMS, but it has not yet been certified as complete.
According to the Kaiser Family Foundation, 60% of non-elderly Medicaid recipients are already working full time or part time, and a majority of the remaining 40% are not working due to illness/disability, school attendance, or caregiving.
Softheon and ACAP hosted a webinar on: Navigating CMS’ New 1115 Waiver Approval Process 1115. Watch it now.
- (n.d.). Healthy Indiana Plan 2. Retrieved from The State of Indiana. (May 15, 2014). HIP 2.0 Proposal. Retrieved https://www.antheminc.com/wellpoint/groups/wellpoint/documents/wlp_assets/pw_g252936.pdf
- Bernstein, Lenny. (November 29, 2016). CMS nominee set up Indiana’s unusual Medicaid expansion. Retrieved from https://www.washingtonpost.com/national/health-science/cms-nominee-set-up-indianas-unusual-medicaid-expansion/2016/11/29/912a131a-b669-11e6-959c-172c82123976_story.html?utm_term=.0af0bae0051d
- (n.d.). Section 1115 Demonstration. Retrieved from https://www.medicaid.gov/medicaid/section-1115-demo/index.html
- (n.d.). State Waivers List. Retrieved from https://www.medicaid.gov/medicaid/section-1115-demo/demonstration-and-waiver-list/waivers_faceted.html
- Roob, Mitchell & Verma, Seema. (May 1, 2008). Indiana: Health Care Reform Amidst Colliding Values. Retrieved from http://healthaffairs.org/blog/2008/05/01/indiana-health-care-reform-amidst-colliding-values/
- The Henry J. Kaiser Family Foundation. (June 2008). Summary of Healthy Indiana Plan: Key Facts and Issues. Retrieved from https://kaiserfamilyfoundation.files.wordpress.com/2013/01/7786_s.pdf
- The State of Indiana. (May 15, 2014). HIP 2.0 Proposal. Retrieved from http://www.in.gov/fssa/hip/2442.htm
- Politico (January 2, 2018). Trump Administration Approves Second Medicaid Work Requirement, For Indiana. Adam Cancryn. Retrieved from https://www.politico.com/story/2018/02/02/medicaid-work-requirement-indiana-323279