Last year, the State of Indiana launched the latest version of the Healthy Indiana Plan (HIP), made possible through a series of Medicaid waivers sought by Governor Mike Pence and approved by the Obama Administration. As a result, “HIP 2.0” made it possible for more Hoosiers living at or near the poverty line to access health coverage through Indiana’s seminal program, which now replaces Indiana’s traditional Medicaid program for able-bodied adults.
Recognized at the time as the most significant departure from traditional Medicaid ever approved by the Center for Medicare and Medicaid Services, HIP 2.0’s approval ignited a national conversation about the implications of its consumer-driven design for able-bodied adults in Indiana and potentially other reform-minded states. Having served as Governor Pence’s main advisors throughout the waiver’s development, negotiation, and implementation, we understand the crucial role states play in driving sensible Medicaid reforms. A recent independent evaluation released by the Lewin Group, who reviewed enrollment and claims data, member survey data, and data from the three HIP managed care entities, confirms the consumer-driven model’s potential to improve the broader Medicaid program.
A Changing Medicaid Landscape
Medicaid was designed as a critical part of the safety net for our nation’s most vulnerable populations—individuals who are aged, blind, or disabled, and families with incomes well below the poverty line—many of whom possess limited ability to provide for their own well-being. Rules governing the program recognize the necessity of long-term enrollment for those facing serious medical challenges, making it easier for them to get in and stay in the program. Yet many of Medicaid’s enrollment and eligibility policies, which might make perfect sense for certain vulnerable populations, are not always appropriate for able-bodied adults possessing different capabilities and earning potential. Able-bodied adults need coverage, but not the same set of policy protections.
One of the precepts of President Lyndon Johnson’s War on Poverty, from which Medicaid arose, is that government assistance should exist to provide a temporary pathway for people to lift themselves out of poverty toward a state of self-sufficiency. This is especially relevant today as Medicaid’s able-bodied adult population continues to grow in size as a result of broadened eligibility for the program. Unfortunately, today’s Medicaid program operates largely within an antiquated framework that is not designed to prepare members for health coverage after Medicaid, and may even be counterproductive to that end.
A Consumer-Driven Approach to Medicaid Reform
HIP’s consumer-driven design familiarizes its members with the concepts of commercial health insurance and encourages them to be prudent consumers, comparing cost and quality of health care services. In light of the “churn” present in the Medicaid program, HIP’s policies are structured to be as consistent as possible with standard provisions found in commercial health plans, including Marketplace plans. This consistency is also important to mitigate the subsidy “cliff,” which effectively increases the marginal tax on work. Taken together, HIP’s series of incentives and consequences engage members in their health care decisions, encourage continuous enrollment, and support transition to commercial health insurance.
In line with commercial market consumer-driven plans, HIP members receive a $2,500 deductible health plan (HDHP) paired with a $2,500 “POWER” account, similar to a health savings account (HSA). The POWER account is HIP’s paramount feature. It acts as both a payment mechanism and a terminal through which HIP’s incentive structure flows. Members use the POWER account to pay for health care services until the deductible amount is met, at which point the HDHP becomes solely responsible for paying any further claims. Preventive services are provided outside the deductible and members do not face any barriers to seeking these services.
Contributions to Savings Accounts
HIP members begin coverage in HIP Plus, which offers benefits similar to those found in the commercial market and also includes modest dental and vision coverage. To maintain enrollment in HIP Plus, members are required to make monthly contributions in the amount equal to 2 percent of their income, comparable to the Marketplace’s premium formula. Unlike premiums, members own these contributions and are refunded their pro-rata share when they leave the program. The member’s pro-rata share is also rolled over from one plan year to the next, thereby reducing the contribution amount required for the upcoming plan year. Rollover amounts are increased for members who complete requisite preventive care services.
HIP respects the dignity of each member by setting a fair expectation of personal investment and engagement in his or her own well-being. Contributions are a way for members to demonstrate personal responsibility, but they also encourage members to stay engaged with their health plan, providers, and overall personal health. Because HIP Plus members’ own dollars are at stake, they have “skin in the game” and therefore an incentive to make cost-conscious health care decisions. Members receive monthly statements detailing the cost of services received, which they can be mindful of when seeking out lower-cost alternatives. Forty percent of HIP Plus members check the balance of their POWER account at least once per month, and one in four members ask their providers about the cost of care.
HIP Plus members who fail to make contributions within a 60-day grace period are terminated from the plan. Terminated HIP Plus members below the poverty line are transferred to the HIP Basic plan, which offers a more limited benefit package that excludes dental and vision coverage. HIP Basic members also are subject to co-payments for services, which can easily wind up being costlier than the contribution amounts required to maintain HIP Plus enrollment. Because HIP Plus represents the superior value proposition, members have a strong incentive to avoid falling back into HIP Basic. Terminated HIP Plus members above the poverty line must wait six months to re-enroll, with a few limited exceptions. This consequence is consistent with the Marketplace’s non-payment policy, where terminated policyholders must wait up to nine months for the next open enrollment period in order to regain coverage.
HIP’s payment incentives are producing solid results. On average, 70 percent of HIP members make POWER account contributions. Further, 85 percent of those who contribute are below the poverty line. Additionally, more than 92 percent of members who make their first POWER account contribution keep making contributions, which indicates that HIP Plus members recognize and appreciate its value. In fact, over 80 percent of HIP members said they would be willing to pay even more to remain on the plan. Only 5 percent of former HIP members indicated they left the program due to affordability, while more than half reported their successful transition to private health insurance coverage.
Metrics in several areas are significantly better among contributing members. HIP Plus members happen to be sicker than their HIP Basic counterparts, yet they have higher rates of primary (31 percent to 16 percent) and preventive care (64 percent to 45 percent), lower emergency room usage (775 to 1,034 visits per 1,000 member years), greater drug adherence (84 percent to 67 percent), and fewer missed appointments (18 percent to 23 percent). Perhaps most telling, HIP Plus members are more satisfied with their coverage than those who have defaulted to HIP Basic (84 percent to 71 percent).
Incentivizing Appropriate Care Use
Medicaid enrollees have historically tended to seek coverage only after becoming sick, partly because there are often limited reasons for them to act otherwise. By contrast, HIP’s enrollment policies reinforce the concept of continuous coverage, which leads to more effective disease management and prevention. HIP does not provide retroactive benefits, or coverage 90 days before application, as required by traditional Medicaid. Retroactivity does not exist in commercial plans, including Marketplace plans, because it is antithetical to the entire concept of insurance. Especially in a world where all Americans are required to comply with an individual mandate to purchase health insurance, retroactive coverage in Medicaid represents a policy conflict that HIP resolves.
The delivery system functions more effectively when people seek and receive care in the right setting, as HIP incentivizes its members to do. When members choose the emergency room (ER) for care that could have been more appropriately provided in a primary care setting, they are subject to an $8 co-pay, which rises to $35 dollars for each subsequent inappropriate use of the ER. Members who are unsure about where to seek care can call their health plan’s 24-hour hotline and speak to a nurse about their health situation. The State reports that the co-pay feature has consistently resulted in fewer inappropriate ER visits by HIP members when compared with people on traditional Medicaid.
Consistent with commercial market benefit packages, HIP does not require health plans to cover non-emergency transportation (NEMT) services. Transportation availability has not proven to be a significant issue for HIP members during its eight-year history. In fact, more HIP members with access to NEMT reported transportation as the primary reason for missing a health care appointment than members without access to NEMT. Moreover, 90 percent of HIP members report having their own transportation or the ability to rely on family and friends for transportation to health care appointments.
Aiding Transition to ESI
The latest HIP waiver also includes a new defined contribution premium assistance program, HIP Link, to support access to employer-sponsored insurance (ESI). Members may elect to forego HIP Plus or HIP Basic and instead use a State-funded defined contribution POWER account in the amount of $4,000 to pay for any cost-sharing associated with their employer’s plan, including premiums, co-pays, and deductible expenses. By leveraging existing employer-sponsored insurance options, HIP Link helps members transition seamlessly to a familiar insurance plan as their careers and incomes progress.
State workforce development programs can yield very positive results for low-income adults, the same population targeted by HIP. Indiana’s new Gateway to Work program connects HIP members with resources to help them hone job search techniques, receive marketable skills training, develop resumes, and perform well during job interviews. These tools assist HIP members in transitioning successfully from public assistance to stable employment.
HIP continues to be a popular program in our state. Out of the 600 members in the survey, satisfaction stands at 80 percent overall and at 86 percent for those making contributions, a remarkable rate for a public assistance program. Ninety-three percent of surveyed members indicate they would re-enroll in the program. While this figure reflects positively on HIP’s consumer-driven approach, we feel that it also speaks more broadly to the program’s ongoing commitment to the personal improvement of its membership.
HIP 2.0 is Just the Beginning
HIP has been successful in meeting its policy objectives, but it also continues to demonstrate the potential for consumer-driven health care as an alternative to the traditional Medicaid model. While HIP has never touted itself as some sort of national silver bullet, it continues to serve as an example for states having similar interest in re-aligning Medicaid with the broader objective of individual empowerment. Enhancing state flexibility, particularly with respect to the low-income, able-bodied population, can help cultivate further state innovation, leading to a stronger and more effective Medicaid program.