The actuarial firm hired by the state estimates savings of about $156 million per year if Indiana uses its Healthy Indiana Plan to expand Medicaid coverage.

That estimate, included in a Jan. 30 draft analysis of Indiana’s HIP program, could become a key element of the argument Gov. Mike Pence uses to lobby the Obama administration for a waiver to use HIP to provide Medicaid benefits to more than 400,000 Hoosiers.

The analysis by Seattle-based Milliman Inc. found that Indiana has spent an average of $153 million less per year during the HIP program’s six-year-run than the spending caps established by the federal government.

Milliman’s analysis figures that HIP could achieve slightly more in savings--about $156 million a year--over the next three years if Indiana expands HIP 10-fold in order to cover all Hoosiers with household incomes up to 138 percent of the federal poverty limit. That expansion was called for by President Obama's 2010 health reform law, the Patient Protection and Affordable Care Act.

That expansion could include as many as 439,000 people by 2016, according to Milliman’s projections.

The HIP program provides health insurance coverage for low-income working adults, but requires them to make contributions up to 5 percent of their annual incomes. According to a January 2011 analysis of HIP, MIlliman noted that the program's additional coverage of vision and dental care, as well as its higher payments to doctors and hospitals, actually makes the program 44 percent more costly than traditional Medicaid.

At the same time, however, enrollees in HIP have been shown to make fewer non-emergency visits to the emergency room than Medicaid beneficiaries, which is one way the program has achieved lower spending than traditional Medicaid.

The purpose of Milliman’s latest analysis is to help the Pence administration show the federal government that using HIP will be budget neutral.

This month, Pence submitted an application to U.S. Department of Health and Human Services to extend the HIP program for three years.

Milliman’s previous projections about the cost of a Medicaid expansion in Indiana have drawn criticism. The firm estimates that expanding Medicaid in Indiana would cost, at a minimum, $140 million per year.

By contrast, an estimate by the Urban Institute, a left-of-center think tank in Washington, D.C., pegs the cost of Medicaid expansion in Indiana at about $54 million per year.

And an analysis by University of Nebraska researchers, commissioned by the Indiana Hospital Association, pegged the cost of a Medicaid expansion at about $72 million per year.

"There are a lot of variables. That's why there are so many different assessments of what the cost will be," Rep. Ed Clere, R-New Albany, told the Associated Press. "In order to calculate the potential cost, you have to make a number of assumptions, and whenever you change one or two of those variables it can cause the number to fluctuate wildly."

Milliman’s latest analysis includes the assumption that the cost of new enrollees in an expanded HIP program would run about 20 percent less per person than the 41,000 Hoosiers currently enrolled in the program—because it assumes the new enrollees will be younger and healthier, on average.

The HIP program ended up costing twice as much money per enrollee as expected when it first passed by the state Legislature in 2007.