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Indiana Medicaid Proposal Misses the Mark

May 30, 2014

Recently, plans were announced by Governor Mike Pence to expand health coverage for Hoosiers through an altered version of the state’s Healthy Indiana Plan. While the goal of providing insurance coverage for low income Hoosiers is laudable, the means should be cause for concern among Hoosier taxpayers.

The Healthy Indiana Plan (HIP) was originally created as a market based program to provide alternative health insurance coverage for low income Hoosiers. Each participant is given an account which acts much like a Health Savings Account (HSA) but requires monthly contributions in order to remain eligible for the program. As studies have shown, the HSA-like account encourages participants to spend their resources wisely and use health care in a more responsible manner than their traditional Medicaid enrolled counterparts. This “skin in the game” approach is in many ways the centerpiece of the Healthy Indiana Plan.

To satisfy the federal regulators, the latest Medicaid expansion plan for Indiana – while utilizing similar HSA style accounts – unfortunately removes the contribution requirement for the vast majority of those who would be participating. Under the new plan, those participants below the federal poverty line who stop making contributions to their account would simply be shifted to “basic” coverage with fewer benefits. Those above the federal poverty line who are eligible but fail to make contributions would lose coverage for six months. While taxpayer subsidized options exist for those above the poverty line in the federal health care exchange, it is unclear what would ultimately happen to those who are placed on the six month probationary period. In any case, coverage is virtually guaranteed – but with much less personal responsibility.

In addition to the design, the size of the expansion is troublesome as well. Whereas enrollment for the original HIP was capped to control costs, the proposed expansion has no cap and is projected to balloon Medicaid coverage to nearly 600,000 Hoosiers. Indiana currently allows Medicaid eligibility for individuals making up to 22% of the federal poverty line. The new expansion of Medicaid would cover non-disabled, working-age adults making up to 138% of the federal poverty line, bringing nearly 350,000 new Hoosiers to government-funded health care. As the Foundation for Government Accountability points out, the incentives of the new expansion plan could crowd out private insurance, making it easier for Hoosiers to drop their own coverage and enroll into the taxpayer-subsidized program.

If approved, the plan will be paid for mostly by the $16 billion of federal money available for Medicaid expansion under the President’s Affordable Care Act. But this assumption of guaranteed funding is a dangerous one, given that our national debt has spiraled out of control, and future, long-term federal funding commitments are anything but reliable. Furthermore, as Indiana’s own Medicaid costs rise (Medicaid already comprises roughly a quarter of the budget) it will crowd out funding for other essential government services like roads, schools, and emergency response. Hoosiers will either be forced to cope with reduced funding for these necessities or face higher taxes to help sustain them.

We Hoosiers have a long tradition of embracing fiscal responsibility and shunning away from large, expansive government programs. Throughout his time in Congress and as the Hoosier state’s chief executive, Governor Pence has been a champion for federalism, and he no doubt attempted to hold that line in rejecting traditional Medicaid expansion and insisting that HIP be part of any Medicaid discussion.

Yet, rather than meeting Washington’s demands, states should be given the ability to truly reform their own Medicaid programs with no-strings attached federal block grants – a sensible solution that many including Governor Pence were advocating for long before President Obama’s disastrous law was thrust upon the American people.

Chase Downham is the Indiana State Director of Americans for Prosperity

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