Medicaid and State Government and Health Care Costs and Health Care Reform and Health Care & Life Sciences and Health Care & Insurance and Public Health

Pressure rises on lawmakers to expand Medicaid

February 11, 2013

Up until now, Gov. Mike Pence and his fellow Republicans in the Legislature have been playing a game of poker with the Obama administration over a potential expansion of Indiana’s Medicaid program. But all of a sudden, Indiana’s hand just got quite a bit weaker.

Pence reiterated last week that he won’t support raising eligibility for the Indiana Medicaid program to 138 percent of the federal poverty limit—unless Obama’s Department of Health and Human Services lets the state use its Healthy Indiana Plan as the vehicle for that expansion.

So far, the feds have given an unofficial “no” to that request.

Since the Supreme Court’s June decision allowed states to opt out of the Medicaid expansion prescribed by Obama’s Patient Protection and Affordable Care Act, Indiana leaders have figured they could use that “opt-out” possibility to exact flexibility from the Obama administration.

But in just the past month, Obama’s team has been able to win over three conservative Republican governors—Arizona Gov. Jan Brewer, Ohio Gov. John Kasich and Michigan Gov. Rick Snyder—without making such promises of flexibility.

The governors were concerned that not expanding Medicaid could put some of their states' rural hospitals out of business.

Their support does not guarantee that those states’ legislators will, indeed, vote to expand Medicaid, but it certainly adds momentum to proponents of expansion.

Indiana now is surrounded on all sides by states that have indicated they are likely to expand Medicaid.

“That certainly puts a little bit of pressure on the governor,” said Ed Feigenbaum, publisher of the Indiana Legislative Insight newsletter. “And it gives a little more credibility to the Democrats [who are arguing that Medicaid expansion is] going to be the public policy of the country, and if we want to protect our people and protect our businesses, this is something we need to consider.”

And Medicaid expansion is on the table. This week, Republican legislators in the House and Senate will introduce language into existing bills that would require the state to expand Medicaid—although they likely will reiterate Pence’s call for the state to use the Healthy Indiana Plan to do it.

That plan, created in a bipartisan effort in 2007, expanded health insurance coverage to about 40,000 Hoosiers using health savings accounts to which most recipients are required to contribute at least a small amount.

That feature is the sticking point for the Obama administration, said Seema Verma, a health care consultant who has been the point person on health reform for the state of Indiana.

“It's that we require people to make contributions. That really flies in the face of the entitlement thing,” Verma said during a luncheon speech Friday at a conference on health reform in Indianapolis. The conference was staged by the Center for the Business of Life Sciences at the Indiana University Kelley School of Business.

What’s at stake in the decision is coverage for roughly 300,000 Hoosiers who have incomes below the federal poverty limit yet higher than the income threshold for Indiana’s Medicaid program.

The federal poverty limit is $11,170 for a single adult or $23,050 for a family of four. But Indiana Medicaid does not allow childless adults to enroll in Medicaid unless their incomes are just 25 percent of those limits.

Hospitals are desperately lobbying for the state to expand Medicaid. They agreed with the Obama administration to support cuts in federal payments to hospitals to cover health care for the uninsured, in hopes of receiving more money as the law expanded coverage to an estimated 27 million more Americans.

But since the Medicaid expansion was supposed to achieve about half of that expansion, hospitals face the prospect of reduced payments with only a modest increase in paying customers.

On Monday, the Indiana Hospital Association released a study claiming the Medicaid expansion would add $3.4 billion to Indiana’s economy per year.

But it would come at a cost to the state. A study by the actuarial firm Milliman Inc., produced at the request of former Gov. Mitch Daniels, estimated the Medicaid expansion would cost the state an average of $140 million per year from 2014 to 2020.

Another set of estimates, produced by the Urban Institute, a left-of-center think tank based in Washington, D.C., pegged the cost of expansion at less than $54 million per year.

Feigenbaum said he expects Indiana’s lawmakers to come up with a solution this session that expands Medicaid but in a way that minimizes the cost to the state. And then, like the Legislature did with the Healthy Indiana Plan, they’ll take the risk of getting it approved by the federal government.

“If I had to guess at this point, I would say that there would be an expansion but not in a form that anybody forecasts at this point,” Feigenbaum said. “That we’ll come up with a unique and innovative way of doing it within the rules, that will still help more people but wouldn’t have as deep a fiscal impact.”

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