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Former allies turn on Pence's Healthy Indiana Plan

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The National Center for Policy Analysis, an ardent supporter of "consumer-driven" health care, issued a blistering analysis of the Healthy Indiana Plan and Gov. Mike Pence’s proposal to expand it using Obamacare funds.

The Texas-based think tank until this month was run by John Goodman, a conservative economist who calls himself the father of health savings accounts.

Pence has touted HIP and his proposed HIP 2.0 as “consumer-driven” solutions to provide access to health care for low-income Hoosiers. The program creates health-savings-like POWER accounts for all participants, requiring those above the federal poverty limit to contribute some of their own money. It rewards them for seeking preventive care and penalizes them for unnecessary emergency room visits.

The Pence administration will ask the Obama administration later this month to let Indiana use HIP to expand coverage to about 440,000 low-income Hoosiers, using up to $17 billion over the next decade in funds approved by the 2010 Obamacare law.

“I have long advocated for the repeal of Obamacare. Yet Republicans have been talking for even more years about reforming Medicaid. That’s what we’re doing in Indiana,” Pence wrote in a May op-ed piece in the Wall Street Journal titled “The Smarter Way to Provide Health Care for the Poor.”

But Monday's report by the NCPA on the Healthy Indiana Plan says the program is light on “consumer-driven” elements and heavy on administrative overhead.

“Because HIP and HIP 2.0 have so few real incentives to encourage people to make wise health care decisions, their emphasis on tracking small payments and individual accounts may unnecessarily increase administrative overhead,” wrote Linda Gorman in the NCPA brief. Gorman is an economist and director of the Health Policy Center at the Independence Institute, a free-market think tank in Golden, Colo.

Gorman’s take now conflicts with previous pronouncements from the NCPA.

1. In a September 2011 policy brief for NCPA, Gorman cited HIP as a successful example of applying consumer-directed principles to low-income residents. She argued that the federal government allow all states to use such programs to cover most or all of their Medicaid populations, using a federal funding concept known as “block grants.”

2. In his 2012 book “Priceless,” Goodman included a brief description of HIP as a case study in how states had come up with better ways to serve low-income residents than the standard Medicaid program, even though he did not fully endorse the idea of block grants as the best way to reform Medicaid.

Goodman was recently fired by the NCPA board, allegedly for “sexual misconduct,” a charge Goodman has denied.

Gorman’s report on Monday found little to like in HIP. She faulted HIP for not requiring participants to pay more of their own money into the health-savings-like accounts that are the foundation of HIP. She said the co-pays HIP participants must make for unnecessary emergency room visits are too small and are charged only to about one in four HIP participants.
 
“One of the reasons that consumer-directed health care coverage has been successful in controlling costs without harming health is that people are spending what they regard as their own money. They benefit directly from finding ways to save, and they have an incentive to find innovative ways to use medical care,” Gorman wrote. But, “In HIP, the only reward for lower spending is lower required monthly payments when funds in a POWER account roll into the next year.”

She noted that only 12 percent of current HIP participants have met the requirements to have their payments reduced the following year. And, she added, “HIP 2.0 further weakens individual incentives to reduce spending by lowering required monthly payments.”

Gorman also poured cold water on one of the Pence administration’s main arguments for why HIP is better than Medicaid: that HIP participants have had lower ER use than Medicaid participants.

“Even the claims that HIP reduced emergency room usage are open to question. Although HIP members did use the emergency room at a lower rate than people in Indiana Medicaid, the lowest-income members visited the emergency room at roughly the same rate as regular Medicaid program adults,” Gorman wrote, implying that ER use might be higher among the aged, blind and disabled Hoosiers, which Medicaid covers but HIP does not. “It is impossible to determine whether the lower rate of emergency room usage was due to the HIP program or to other differences between the Medicaid and HIP enrollees.”

Gorman’s report joins a parade of conservative criticisms of Pence’s HIP 2.0 plan, although few of those have gone so far as to attack the original HIP plan. Those criticisms even hit the airwaves in Indiana last week, with the Florida-based Foundation for Government Accountability running radio ads against the HIP 2.0 plan.

“Governor Pence rode the anti-Obamacare wave to some of the highest positions of power in state and federal government,” the group’s president said in a statement last week. “Now, he sold his supporters down the river to become an Obamacare activist lobbying for Medicaid expansion in Indiana and across the country.”

In Indiana, Pence’s HIP 2.0 plan has received broad praise. It was negotiated with and has the support of the Indiana Hospital Association. And last week, Sen. Luke Kenley, R-Noblesville, encouraged Indiana's Democrat legislators to lobby their party colleagues in the Obama administration to approve the plan exactly as written.

"I think this plan is much more beneficial to the patient and the customer" than traditional Medicaid, said Kenley, according to the Associated Press. "I think there is a great opportunity. I hope the federal government will see fit to approve our waiver request the way it stands."

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  • Applause for Milestogo
    I could not agree more. Politicians spend too much time trying to denigrate one another rather than find solutions to problems. Both political parties did their part to create most of the problems they try to attach as having been caused by the other. Republicans have been just as much the cause of big government as democrats, despite their denial. I don't want big government or small government, I want an effective government. We have been blessed in Indiana by having had that for much of our recent history... until lately. Now it is as bad as our national politics in that it is all a dog and pony show and no results or solutions.
  • Go for the Best Solutions
    To me, the best solutions to providing health care haven't been presented yet. All this partisan bickering, fear-mongering, and the attempts to "win" for the Republicans or the Democrats just obscures the picture. How can HIP 2.0, a unique, one-state approach to Medicaid expansion monitor the fraud problems that seem to be a big concern? How can a $25 or $20 payment make any difference to someone who needs health services-- except to prevent them from taking steps to solve a health problem till it gets worse? How can the "success" of HIP under Governor Daniels even be called success unless you just look at the small number of uninsured people who were in a low enough income category to desperately need and qualify for the limited HIP waiting list? I have to commend Mr Pence for doing a good sales job, and effectively announcing to the world that he has a "new" way to provide Medicaid services to those in need of care. But it seems that he's lost in the partisan problem of declaring that nothing that President Obama's ACA will work and at the same time just wrapping it up in his own brand of Hoosier Free Market Hospital Giveaway and still spending lots of Federal Tax dollars to provide health care to those in need. Why the deception, when working to solve the problems common to many states, using programs that are already operating, and fixing what is wrong could move our country forward? It is a sure thing that Medicaid expansion itself won't solve the perception that low income consumers have no choice but the Emergency Room for care. But neither will complicated formulas, health savings accounts and tricky "so-called incentives" that look good on paper but make no sense to someone who is in need of care. To me, HIP 2.0 is just more partisan bickering. Let's start taking the best look at how care and choice of care can be extended to all; that's what I'd like to see.
    • real people
      Having always had health insurance (and always trying to use it wisely), I am always shocked when I run across people who have to make a financial choice that harms their health. One time worked a part time job with a woman who had stepped on a rusty nail that went through her shoe and came out the top of her foot. That's what she told me when I asked why she was limping at work (a job that required standing 95% of the time). She could not afford to go to the emergency room because her children needed to eat and have a roof over their heads. I don't know how this turned out for her, but it could have gone badly and/or affected her for a long time. I tried to talk her into going to get it treated but she was unable to make that choice. Those who are parsimonious about access to healthcare for others are really a special breed of hard-hearted.
    • RE "misuse" of ER
      The research I have done and that done by others identifies the "most frequent fliers" of misused ER services as those with health coverage but no accessible medical home. Persons without coverage avoid the ER until they desperately need it because they are assessed charges for such use. For people without sick days in their employment and whose usual non-hospital sources of care are not available in the evening, the ER is an inconvenient but reliable source of care. Inconvenient because of the long waits for attention. A few immediate care facilities proximate to ER rooms that are open in the evening and on weekends would make things work better for everyone. There was a study conducted by a well known health economist at IUPUI a few years ago that concluded that reducing "unneeded" ER use would result in lower revenues because the "unneeded" care cost less to produce, but still commanded high prices.
    • A pox on both houses!
      So Mr Pence strayed from the fold on the religion of high deductible health care. I thought Pence had at least found a modicum of practicality wrapped up in the ideological wrapping of health savings accounts. Some have thought - let HIP 2.0 go through--it's better than nothing, though still flawed. What his detractors are griping about that they prefer the nothing. Consumer-directed health care/high deductible plans sound fine to folks with full coverage and no co-payments or who are the young invincibles until they encounter the back side of age 40. High deductibles do block unneeded health care but also (as demonstrated in Rand studies 40 years ago) they also deter needed preventative health care. Lower financial barriers allow persons who have avoided good primary care in the past to get their issues assessed and managed. Over use for that small fraction hypochondriacs who like to go to doctor appointments can be met with well organized primary care homes - maybe with Accountable Care Organizations. As for the often cited desire to make low income consumers more price sensitive and thus to discipline the health sector - a bit of reflection will dismiss those arguments. Most low income folks I know (and I know a few) are already parsimonious with health care dollars to a fault. Moreover the prices presented by health institutions do not signal relative costs, but rather maximum revenue strategies - that is prices are higher in cases of inelastic demand, not higher marginal costs. I certainly don't prefer HIP 2.0 over expansion of traditional Medicaid, but I do prefer it over doing nothing which seems to be the orthodoxy Pence has transgressed.

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