On June 22, the Governor of Kentucky unveiled a Medicaid reform plan to replace its highly successful Medicaid expansion. The new Kentucky Medicaid plan is not innovative, instead relying on policies that have been shown to be counterproductive, decreasing coverage and access while increasing the health disparities that affect poor and vulnerable populations.
Kentucky’s New Medicaid Proposal
Under former Democratic Governor Beshear, Kentucky had one of the nation’s most successful Affordable Care Act (ACA) implementations, with an effective state exchange and expanded Medicaid program. Through Medicaid expansion, more than 310,000 Kentucky residents gained health insurance in 2014, and the state’s economy was projected to benefit by more than $30 billion and 40,000 new jobs by 2021.
In December 2015 Governor Beshear was replaced by Republican Matt Bevin, who shortly after taking office released a detailed plan, “Kentucky Health,” that would “implement key commercial market and Marketplace policies” to prepare people with expansion Medicaid coverage to “become active consumers of health care.” The main elements are: 1) monthly premiums that increase over time; 2) a volunteer or work requirement; 3) eliminating benefits including vision and dental care and non-emergency medical transportation, ostensibly to make Medicaid more like a commercial insurance plan; and 4) an incentivized “My Rewards” account in which credits would be accumulated for approved behaviors such as community service or work and debited for behaviors deemed inappropriate such as non-urgent emergency room (ER) use. The credits in this account could be used to purchase back services that are no longer covered.
These changes are in a waiver application that must be approved at the federal level by the Centers for Medicare and Medicaid Services (CMS). Governor Bevin has said that he will discontinue Kentucky’s Medicaid expansion if the waiver is not approved. Waiver plans are approved if they are consistent with the goals of Medicaid: to improve health care access, increase or strengthen coverage, improve health outcomes, and increase efficiency and quality of care. Their impact is subject to objective evaluation.
A New Proposal with Nothing New
The elements of the Kentucky plan have been included in other waiver applications submitted by Republican governors. Arkansas requires premiums and does not cover non-urgent ER use. Arizona’s proposed plan has premiums, co-pays, a work incentive program, and incentives for specific health behaviors. Iowa includes premiums, behavioral incentives, a co-payment for non-urgent ER use, and termination of non-emergency medical transportation. Tennessee’s proposal has premiums and co-pays that range up to $75 for an inpatient admission. The state plan that Kentucky has followed most closely is Indiana, which proposes the most extensive set of changes to Medicaid.
Indiana’s Medicaid waiver plan, “Healthy Indiana Plan 2.0 (HIP 2.0),” is intended not only to provide health care access but also to “drive consumer engagement and decision making” through incentives. Instead of monthly premiums, in HIP 2.0 the state established accounts similar to health savings accounts (HSA) for individuals covered by expansion Medicaid. Medicaid funds are deposited, with the individual responsible for contributions of 2 percent of monthly income. If a payment is missed, after a grace period coverage is terminated with a six month “lock out” period before coverage can be restored. The plan includes a co-payment for non-urgent ER use of $8 for the first instance and $25 subsequently. Its work requirement was not approved by CMS.
The Kentucky Proposal is Contradicted by Evidence
For the Medicaid expansion population, premiums would range on a sliding scale to $15 a month and increase 50 percent each year to a maximum of $37.50 to resemble marketplace charges and “discourage Medicaid dependency.” Similar to the Indiana plan, Kentucky would administer a “six month non-payment penalty,” terminating coverage and requiring a six month lock-out to re-enroll if a payment is missed. Subsequent to the Kentucky plan’s release, a provision of Indiana’s lock-out policy related to renewals was not approved by CMS.
Medicaid cost sharing is an old idea. An analysis of the impact of premiums in four state programs implemented during the 1990s published in Inquiry (Winter 1999/2000) found it reduced Medicaid participation. In 2005 the Kaiser Family Foundation reviewed subsequent evidence and additionally found that cost sharing often forces a choice between maintaining health care and paying for other necessities like housing and food. A longitudinal study of the impact of cost sharing in Oregon, published in Health Affairs in 2005, showed a 44 percent decline in the number of Medicaid beneficiaries who continued their coverage within six months of implementation. More recently, a review of the literature on Medicaid cost sharing found that it was also associated with missing or delaying needed health care leading to worse outcomes, especially for people with chronic conditions.
In the states that have required Medicaid premiums for the longest period of time (Michigan, Iowa, Arkansas), the revenue generated has been modest at best. This would be offset by the administrative cost necessary to send bills, track and allocate revenue, and follow up to terminate and possibly reinstate coverage. While there may be budgetary savings due to reduced enrollment—as Kentucky’s proposal does predict an enrollment drop—any potential savings could be offset in the long term by higher health costs of the uninsured.
In the Kentucky plan, after three months “able-bodied adults” would have to volunteer or work at least 20 hours a week to earn the coverage they are already paying for through monthly premiums. To date, state Medicaid proposals to include a work requirement have not been approved. Experience from other federal programs shows that mandatory work requirements do not lead to sustained increases in employment. This was established more than a decade ago in an extensive study of the impact of welfare reform. For Medicaid, it would likely lead to loss of coverage and worsening health for the most vulnerable beneficiaries.
The notion that a work requirement is necessary is based on the false narrative that Medicaid discourages employment and promotes dependence. Among adults on Medicaid, three-fourths live in households in which at least one person is employed: 61 percent with a full-time worker, and 13 percent with a part-time worker. The problem is not that people are avoiding work but rather that they are in jobs with wages low enough for Medicaid eligibility without health insurance as a benefit.
Eliminating covered services and behavioral incentives
When California eliminated adult dental benefits in 2009, the result was increased emergency room use with higher health care costs. Vision coverage includes prescription eyeglasses. Cutting this benefit can seriously limit the mobility of low-income adults who require corrective lenses to drive and lack access to public transportation. State plans to eliminate the Medicaid transportation benefit have been approved despite evidence of the value of this service. A 2005 study done for the National Academies of Science found that the cost of providing transportation to medically necessary appointments is more than offset by savings attributable to improved management of chronic conditions and reduced hospitalization and ER use. This was subsequently confirmed in a 2009 study of Medicaid transportation services.
Many Medicaid waiver plans include punitive measures to discourage non-urgent ER use. This is based on another myth about Medicaid, that it causes beneficiaries to seek care in emergency rather than primary care settings. This too is contradicted by facts: only 10 percent of adults on Medicaid make non-urgent ER visits compared to 7 percent of commercially insured adults. An analysis of data from the 2013 and 2014 National Health Interview Surveys showed that among adult ER users, those covered by Medicaid were most likely to report that the reason for their visit was the severity of their medical problem whereas commercially insured adults reported using the ER because their doctor’s office was closed. Uninsured adults were most likely to have come to the ER because they did not have access to an alternative source of care.
Policy Should be Based on Evidence
The Kentucky Medicaid waiver proposal, like the Indiana proposal and many others, applies ideology-based myths about Medicaid rather than an objective assessment of the efficacy of policies intended to meet the program’s goal, increasing health care access for vulnerable populations. The idea that Medicaid discourages work, encourages dependency on government, and causes irresponsible use of health services, is demonstrably false. Policies based on false notions cannot be expected to work effectively, and evidence gathered over time shows that the specific elements of the Kentucky Medicaid waiver do not work.
A preliminary assessment of Indiana HIP 2.0 has revealed serious issues with this Medicaid redesign. Problems with Indiana’s implementation were also found, for example, inconsistently applying the cost-sharing provision and inadequately informing beneficiaries that they have an HSA-like account opened in their name. It is clear that access to care was harmed not enhanced.
As expected, the requirement for a premium discouraged otherwise eligible people from enrolling. Those who did enroll but were unable to pay a premium had more limited access to primary care and made more ER visits. Lack of available transportation kept some enrollees from keeping necessary appointments. A required co-payment for monthly prescription refills made it difficult for many Medicaid beneficiaries to get medications needed to control their chronic conditions. African-Americans were disproportionately included in this group who experienced significant barriers to health care under the Indiana waiver plan.
There is no reason to expect better outcomes when Kentucky or any other state recycles these ideas. Policymakers should seek out evidence for or against proposed changes to Medicaid rather than substituting ideology for fact-based decision making. Increasingly health policy, especially as it impacts poor and other vulnerable populations, reflects political positions. The public health community has an obligation to point out instances where policy deviates from evidence and is reliably predicted to be counterproductive to program goals. In the current climate, this may require political engagement.