Indiana Gov. Mike Pence Expands Medicaid Under Obamacare

01/27/2015 12:14 pm ET | Updated Jan 28, 2015
AP Photo/Michael Conroy

Indiana Gov. Mike Pence on Tuesday became the latest Republican governor to accept an expansion of Medicaid to cover more poor residents under the Affordable Care Act.

Like the expansions in other Republican-led states, Pence's plan doesn't merely broaden Medicaid, but rather uses the federal funding available to remake the program. Enrollment starts immediately, and coverage begins Feb. 1. The expansion eventually will reach 350,000 people, Pence said when announcing federal approval for the proposal at a news conference in Indianapolis.

Republican resistance to the Medicaid expansion at the state level has worn down since a Supreme Court ruling in 2012 made this part of Obamacare optional for states.

GOP governors and legislators in states like Arkansas, Ohio and Pennsylvania have extracted concessions, including increasing the role of private health insurance plans in Medicaid, from President Barack Obama's administration, which is eager to provide Medicaid coverage to as many poor Americans as possible. Including Indiana, 28 states and the District of Columbia have expanded Medicaid under the Affordable Care Act.

Pence's plan is the biggest departure from traditional, government-run Medicaid yet. The so-called Healthy Indiana Plan 2.0, as Pence dubbed it, ties benefits to monthly payments by beneficiaries below the poverty line, a first for Medicaid, and includes other features Pence billed as conservative and market-based.

"We have worked hard to ensure that low-income Hoosiers have access to a health care plan that empowers them to take charge of their health and prepares them to move to private insurance as they improve their lives," Pence said in a press release.

The Healthy Indiana Plan 2.0, or HIP 2.0, differs greatly from traditional Medicaid, under which people with low incomes and people with disabilities are covered by a government program that pays for their medical care.

Pence's program builds on the state's 7-year-old Healthy Indiana Plan, which currently covers 60,000 people with high-deductible health insurance and health savings accounts. Adults without disabilities who are currently enrolled in traditional Medicaid will be moved to the Healthy Indiana Plan, also known as HIP.

The most novel aspect of the so-called HIP 2.0 is that enrollees will have to make contributions into "POWER accounts," modeled after private-sector health savings accounts. People with incomes above poverty, which is about $11,500 for a single person, must deposit between $3 and $25 into these accounts per month. People who fail to make these payments can get their benefits taken away for six months. These contributions are optional for people making below poverty wages, but if these beneficiaries don't contribute, they receive less generous health coverage. Individuals who use these POWER accounts and receive required preventive health services will pay less for their benefits.

In addition, Healthy Indiana Plan 2.0 will provide financial assistance to qualified workers to buy into their employers' health insurance programs. The plan will also link Healthy Indiana Plan enrollees to voluntary job-training and referral services.

The Affordable Care Act provides full federal funding of Medicaid expansions through next year. States will be required to cover a portion of the cost in future years, but never more than 10 percent. State cigarette taxes will fund a share of Indiana's future expenses, and members of the Indiana Hospital Association agreed to finance another share starting in 2017. The hospital financing also will cover the cost of increasing payments to doctors and other medical providers. Hospital associations in most states support expanding Medicaid because they currently lose money when they treat uninsured patients who can't afford the care they receive.

Republicans in states including Alaska, Tennessee and Utah also are debating expanding Medicaid in some form this year.

“I continue to be encouraged by interest from governors from all across the country who want to bring health care coverage to low-income people in their states by expanding Medicaid," U.S. Health and Human Services Secretary Sylvia Mathews Burwell said in a press release. "The administration will continue to work with governors interested in expanding Medicaid to devise approaches that work for their states while keeping faith with the law’s goals and consumer protections."

CORRECTION: A previous version of this story incorrectly stated Indiana is the first state to require Medicaid enrollees above the poverty level to make monthly payments for their coverage. It also incorrectly described how much states are required to pay for the Affordable Care Act's expansion of Medicaid.

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