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Medicaid Incentives Are Poor State Investments

Health and Human Services (HHS) nominee Tom Price called Indiana’s cost sharing and penalties in its Medicaid program “a best practice for states.” But these incentives for beneficiaries to use preventive care and avoid the emergency room are a poor investment — at best — the research shows. At worst, they cause hardship for poor families.

Under the Healthy Indiana Plan (HIP) 2.0, Indiana is testing the effects of incentives to influence Medicaid beneficiaries’ health choices. The program, which was designed with help from Seema Verma, President Trump’s nominee to lead the federal Centers for Medicare and Medicaid Services, penalizes beneficiaries if they don’t engage in healthy behaviors or use the health care system efficiently. This approach is growing more popular and other states are already proposing to follow Indiana’s lead. Rather than improving care, however, an early evaluation of HIP 2.0 showed that many beneficiaries were confused or unaware of the incentive structure, and those who were penalized were more likely to lack adequate access to health care.

An earlier program in West Virginia also produced disappointing results. It restricted benefits for those who failed to engage in primary care, but emergency room visits among people with limited access to primary care rose. The state later discontinued the program.


Other states have provided incentives for healthy behaviors ranging from gift certificates to deposits in health savings accounts. While these rewards don’t block access to needed care as penalties do, the results are mixed at best — some behavior rewards may have benefits for short-term behaviors, but they haven’t changed long-term behavior or health outcomes, research shows. States also incurred significant costs to implement and administer these programs.


Reward programs rest on the assumption that Medicaid beneficiaries often don’t make the healthiest choices available to them, and that this can raise Medicaid costs, especially when it results in more emergency room visits. Medicaid beneficiaries, however, generally use appropriate services if they’re accessible, evidence shows. Given their limited Medicaid resources, states should consider investing in strategies to improve access to appropriate health services, better coordinate care, and integrate health and social services, rather than implementing complex programs that are challenging and costly to administer and in some cases yield counter-productive results. And if confirmed as HHS Secretary, Dr. Price should consider the evidence showing that health incentives are a poor investment.