Indiana passes health reforms, Medicaid pay boost for doctors

A 44-cent cigarette tax increase will pay for a plan to insure up to 130,000 Hoosiers and fund several other health initiatives.

By Doug Trapp — Posted May 21, 2007

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Indiana lawmakers approved a $206 million boost in the state's cigarette tax to pay for various health initiatives late last month, including a health plan for low-income residents and a Medicaid pay raise for doctors.

The 44-cents-a-pack increase brings the state's tax to 99.5 cents per pack, the 37th highest rate in the U.S. About $155 million of the increase will pay for the Indiana Check-Up Plan, a health insurance program that will provide:

  • Up to $500 annually in preventive care paid by the state.
  • Personal Wellness Responsibility Accounts, similar to health savings accounts. Workers, the state and employers contribute $1,100 toward health expenses.
  • Basic health coverage for enrollees who exhaust the $1,100 in their accounts in any one year.

Indiana Check-Up is expected to provide up to 130,000 low-income residents with health insurance. Although that is just a fraction of the 500,000 people in the state without insurance at any one time, lawmakers and others said the bill is one of the most significant pieces of health care legislation in many years.

Financing is always a factor in how much can be accomplished, said Vidya Kora, MD, president of the Indiana State Medical Assn. and an internist in Michigan City.

"Even though it did not solve the problem of the uninsured in its entirety, most people felt this was the best they could get accomplished based on how much money was at the table," Dr. Kora said. The ISMA called for a $1 increase.

The bipartisan effort began last November, when Gov. Mitch Daniels proposed a 25-cent tax increase to cover 120,000 of the state's uninsured. Legislators added mental health parity and the option to buy vision and dental coverage and nearly doubled the tax. In the end, 33 cents of the final 44-cent tax boost has been designated for Indiana Check-Up.

Legislators used the same bill to expand eligibility for children in the State Children's Health Insurance Program from 200% to 300% of the federal poverty level. The measure also creates tax credits for employers offering section 125 plans -- those giving employees a choice between nontaxable benefits and cash -- and for employers offering wellness benefits. Another provision allows small businesses to pool together to purchase health insurance.

The Indiana Senate approved the bill 37-13, and the House passed it 70-29 on April 29. A Daniels spokeswoman said the governor will sign the measure, which the ISMA supported.

Medicaid gets slight boost

Also significant is that 2 cents -- or $10 million -- of the tax increase will be used to increase Medicaid reimbursements for physicians, the first increase in 18 years, Dr. Kora said. Federal matching dollars could bring the total to $30 million, he said.

"It hasn't done justice to the fact that there has not been an increase in 18 years, but at least it's a step in the right direction," he said.

Many in the Indiana General Assembly have supported increasing Medicaid rates, but they hadn't found a way to pay for a raise before the cigarette tax. Even that was up in the air until the last two days of the session, said Indiana Sen. Patricia Miller, chair of a Senate health panel.

The ISMA doesn't have a comprehensive survey of the state's Medicaid reimbursement rates, but the medical association's comparison of about a dozen billing categories found Indiana Medicaid pays about half as much as Medicare does, according to Zach Cattell, ISMA director of government relations. For example, a routine office visit brings $18.20 for Indiana Medicaid, compared with $34.23 for Medicare, Cattell said.

However, Medicaid managed care organizations complicate the payment picture. All women and children in Medicaid -- about 540,000 of the 1 million Medicaid beneficiaries -- are enrolled in one of the state's three managed care plans, which reimburse physicians at a slightly higher rate than does the state, Cattell said.

Managed care companies don't all pay at the same level, but doctors can negotiate a relatively decent rate, said Don Wagoner, MD, a family physician in Burlington, Ind. Medicaid covers 18% of his patients. For his practice, Medicaid managed care "has been a pretty good thing."

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Hoosier checkup

The Indiana General Assembly passed legislation to create the Indiana Check-Up Plan, which would:

  • Cover uninsured, nondisabled parents who earn between 22% and 200% of the federal poverty level and have children enrolled in Medicaid or the State Children's Health Insurance Program. It also would cover childless adults and pregnant women earning up to 200% of the poverty level. Applicants must not be eligible for employer-sponsored health insurance.
  • Offer $500 from the state for preventive care each year.
  • Create Personal Wellness Responsibility Accounts, similar to health savings accounts. Employees would contribute 2% to 5% of their income on a sliding scale, employers half that amount and the state the rest, to total $1,100 each year.
  • Cover, for those whose medical costs exceed $1,100 in one year, preventive care, family planning except abortions, case and disease management, and hospice care. The plan offers the same level of mental and physical health benefits, covers dependents up to age 24, and has coverage limits of $300,000 annually and $1 million in a lifetime.

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