The Debate over Expanding Medicaid in Indiana
The Debate over Expanding Medicaid in Indiana

On the surface, a debate about expanding access to health care to more low-income Hoosiers seems preposterous. Why wouldn’t we? However, the issue of whether or not we should expand coverage (which Indiana must do in order to receive a sizable “carrot” from the federal government) is less paramount than the issue of how to expand coverage to approximately 400,000 more Hoosiers.

Medicaid expansion is one of the provisions of the Affordable Care Act that states have the option to accept. The expansion is designed to broaden coverage to adults with incomes below 133% of the federal poverty level (FPL), which after disregarding the first 5% of household income effectively equates to 138% of the FPL, or about $32,500 for a family of four. While Medicaid criteria currently varies by state (in contrast to Medicare, which is uniformly managed across the country for all persons over age 65 and those who are under age 65 and disabled), most states fail to cover the vast demographic of childless, non-disabled adults.

The proverbial “carrot” from the federal government is significant. The feds have offered to cover 100% of the costs of Medicaid expansion for the first two years (2014-2016). Thereafter, the federal subsidy gradually decreases to 90% in 2022, where it will remain indefinitely.

Since the Obama administration has firmly stipulated that states must meet all expansion rules (including coverage up to 138% of the FPL) in order to receive federal subsidies, some states – including Indiana – are exploring alternative strategies to meet these requirements.

On February 13, 2013, Governor Pence notified the U.S. Department of Health & Human Services that his administration had decided not to pursue an expansion of traditional Medicaid on the grounds that it would “expand a highly flawed program in Indiana and place an enormous burden on Hoosier taxpayers.” Rather, Indiana is pushing for continued federal funding of its state-run managed care program for low-income individuals, the Healthy Indiana Plan (HIP).

HIP covers nearly 40,000 Hoosiers without employer-sponsored insurance who either do not live with a dependent child or do live with dependent children but earn up to 200% of the FPL and who have been uninsured for six months. HIP members are required to pay a monthly fee based on a sliding fee scale. Gov. Pence’s waiver request included slight modifications to HIP, particularly related to cost sharing and eligibility (such as lowering the income threshold to 133% FPL).

To be clear, Indiana has not officially decided whether or not to expand Medicaid coverage; rather, Governor Pence’s letter requested federal approval to use HIP as the coverage vehicle should the State move forward with expansion. Specifically, Gov. Pence requested approval to extend federal subsidies for HIP for three additional years (2014-2016) beyond the current expiration date of December 31, 2013.

However, the federal government has delayed action on the waiver request due to (surprise) more bureaucratic complexities and regulatory stipulations. In short, the State didn’t hold public hearings prior to submitting its proposal. The Pence administration’s rationale was based on timing due to a looming June deadline to secure federal approval or risk dismantling HIP. The public hearings are scheduled for March 20th and March 22nd. If approved, the expansion would go into effect on January 1, 2014.