Health reform law may trump Indiana health plan for poor

An Indiana health insurance program designed to increase individuals' awareness of health care costs may not be extended past its initial run now that national health reform has become law.

The Healthy Indiana Plan is the first state consumer-directed health insurance plan aimed at people earning Medicaid-level incomes. Both childless adults and parents earning up to 200% of the federal poverty level qualify for the coverage, which includes free preventive care. Healthy Indiana requires a sliding-scale contribution from enrollees to a power account, a type of health savings account.

Many Republicans, including Indiana Gov. Mitch Daniels, see such consumer-directed plans as a way to reduce health care spending by giving individuals more control over how they incur routine health costs. Some Democrats criticize the plans for their potentially higher out-of-pocket spending and more limited benefits.

Daniels has asked the Obama administration if Healthy Indiana -- which is funded largely with Medicaid funds -- could continue after 2014, when the health reform law expands Medicaid to all citizens earning up to 133% of the poverty level.

Daniels said a very high percentage of the roughly 45,000 people in Healthy Indiana now will become eligible for traditional Medicaid in 2014. "I assume that either all or most of them will want to go there," because Medicaid doesn't ask for the financial contribution that Healthy Indiana requires, Daniels said at a June 9 conservative policy gathering in Washington, D.C., hosted by Rep. Michael Burgess, MD (R, Texas).

Health and Human Services Secretary Kathleen Sebelius told an audience at the Indiana University School of Medicine on May 14 that the health reform law didn't outlaw Healthy Indiana. "There's no change that [health reform] made that would make this waiver program difficult to pursue in the future." A federal waiver authorizing Healthy Indiana expires at the end of 2012, but Sebelius didn't guarantee that HHS automatically would renew it before then.

State contributions to Healthy Indiana come from cigarette tax revenues. The program cost a total of $246 million in 2009, according to the Indiana Family and Social Services Administration.

HSA contributions an issue

One physician who served on two advisory panels for Healthy Indiana said the program has not worked flawlessly. Still, he favors it over traditional Medicaid for covering low-income adults, because it encourages them to have a personal stake in their health care spending. The plan requires enrollees to contribute up to 5% of their gross income to the power account, which is used to pay for medical expenses. The state covers the balance needed to raise the account to $1,100.

"It helped meet the need for health care in that population. Like so many state programs, it was underfunded," said Kevin Burke, MD, an internist with Community Medical Associates in Jeffersonville, Ind. He is also past president of the Indiana State Medical Assn., which supported Healthy Indiana's creation.

Healthy Indiana has run into problems, according to a year-long review that Dr. Burke participated in. The Indiana Check Up Plan Task Force concluded in November 2009 that the program's per-member per-month cost of coverage was 30% to 50% more than expected because of enrollees' poor health status, especially for childless adults. Enrollees must be uninsured for six months to be eligible for Healthy Indiana.

Dr. Burke said the required power account contribution was not always working as intended. More than 4,000 Healthy Indiana applicants were eligible for the coverage but did not enroll, because they didn't contribute to power accounts, the report found. Also, about a third of program enrollees also did not contribute to their power accounts, in some cases because their income was so low that the state was required to pay the entire balance.

Still, Healthy Indiana has been in demand. About 25,000 adults without children have been on a waiting list for the program, while adults with kids are still being enrolled. The federal waiver limits the childless adult enrollment, and enrollment also has been limited by the programs' budget.

Cost could motivate the state to switch many of the Healthy Indiana population to Medicaid in 2014. The federal government will cover 100% of the cost of expanding Medicaid to 133% of poverty from 2014 through 2016, phasing back to 90% of costs in 2020. "I don't know any match program existing right now that has that kind of balance in it," Sebelius noted.

In addition, Medicaid benefits are more comprehensive than the Healthy Indiana package, according to a January 2008 policy brief by the Center on Budget and Policy Priorities, a liberal think tank.

Daniels, however, said he would like to see the health reform law invalidated. Indiana is one of at least 21 states suing the federal government to do so, in part because of the funding states will be expected to contribute for the Medicaid expansion.