Indiana wants to use its public health savings account program for low-income adults to cover people who will become newly eligible for Medicaid under the federal health care law beginning in 2014, but federal officials haven't yet said whether they will allow the program to continue beyond next year.
State officials say they have pressed federal Medicaid officials for nearly a year to say whether the Healthy Indiana Plan, or HIP, can continue beyond the scheduled Dec. 31, 2012, expiration of a waiver that allows the state to divert Medicaid funds for the program.
"We've asked them for guidance, and we've really gotten no response," said Seema Verma, an Indiana Family and Social Services Administration consultant who helped design the Healthy Indiana Plan.
The administration now plans to ask the Centers for Medicaid and Medicare Services to approve an amended state plan that would allow the existing HIP program to cover Medicaid expansions required under the new federal law.
CMS spokeswoman Mary Kahn said the agency could not comment on the proposed amendment to Indiana's Medicaid plan until it's submitted. State officials say that could happen as early as the first week of April. CMS then has 60 days to respond.
Part of the state's dilemma is poor timing. HIP's Medicaid waiver expires a full year before the federal Medicaid expansion. But Indiana needs to make plans now for how it will enroll as many as 500,000 newly eligible recipients — whether it's in HIP, traditional Medicaid, or another program.
HIP currently provides about 45,000 enrollees up to $500 in free preventive care such as cancer screenings; a $1,100 medical savings account; and when medical costs exceed that, benefits of at least $300,000. Enrollees make monthly contributions based on their ability to pay, but many pay nothing at all because they earn too little.
Legislation pending in the General Assembly would require minimum monthly payments of $8.33 per month, or $100 annually.
A cost analysis by state actuary Milliman Inc. showed HIP would have to add some services not currently provided — including vision, dental and maternity benefits — to meet the requirements of the Medicaid expansion. The analysis shows the enhanced HIP would cost 44 percent more than traditional Medicaid, totaling $1.85 billion for 336,500 HIP enrollees during the first full year of the expansion.
Under the Medicaid expansion, the federal government pays all costs of the newly eligible enrollees for the first three years, while state shares grow incrementally to 10 percent by 2020.
Verma said HIP costs more in part because it pays doctors at higher rates so more participate. Also, HIP serves a population with more medical needs than the traditional Medicaid population.
Public health insurance advocate David Roos of Covering Kids and Families of Indiana said HIP enrollees also have pent-up medical needs after going for years without health insurance.
"Some very, very sick people are using the program. That's why it's so expensive," Roos said.
The Family and Social Services Administration said the program reduces costly emergency room visits and nearly 80 percent of enrollees take advantage of free preventive services.
While some conservatives and health care policy experts have praised HIP as an innovative state solution for the uninsured, others say the program would not work as a vehicle for the federal Medicaid expansion. The state plans to hold a public hearing on the proposal Wednesday at the Indiana Government Center South in Indianapolis.
Indianapolis attorney Fran Quigley, who has represented clients who have had trouble enrolling or staying enrolled in HIP, acknowledged the program provides a coverage option to low-income, uninsured adults. But he said it is no substitute for Medicaid, which he called more effective and affordable.
He said requiring enrollees to make even small contributions to their plans, as HIP does, violates the spirit and the letter of the federal health care overhaul law.
"If you charge poor families a premium for health coverage, it means some of the most struggling Hoosiers will go without health care," Quigley said.
Republican Gov. Mitch Daniels wrote Health and Human Services Secretary Kathleen Sebelius in January asking that CMS not reject the state plan amendment over the required contributions.
"HIP was implemented with bi-partisan support in the Indiana General Assembly and reflects the values of our state," Daniels wrote. "Indiana prefers to promote this program that contains consumer-focused incentives for personal responsibility instead of a traditional Medicaid entitlement program."