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Replicating Indiana’s Medicaid Waiver Would Take Kentucky Backward

A state-commissioned evaluation that finds serious issues with Indiana’s Medicaid waiver (the Healthy Indiana Plan 2.0, or HIP 2.0), provides further evidence that a proposal from Kentucky Governor Matt Bevin modeled on HIP 2.0 doesn’t merit federal approval, our new paper explains.

Since Kentucky adopted health reform’s Medicaid expansion in 2014, it has cut the uninsured rate in half and covered over 400,000 newly eligible residents.  Many fewer low-income residents are skipping medications due to cost or having trouble paying their medical bills.  Nevertheless, Gov. Bevin has threatened to cancel the Medicaid expansion if the federal government doesn’t approve his proposal for sweeping changes to the program, which would require waiving federal Medicaid rules. 

Indiana has implemented changes similar to what Kentucky proposes, such as setting up accounts similar to health savings accounts (HSAs) for each beneficiary, delaying coverage until beneficiaries pay premiums, and ending coverage for some beneficiaries who don’t pay them.  The evaluation of HIP 2.0’s first year shows that, in important respects, it hasn’t worked as the state intended, likely due in part to its complexity.  Key features of HIP 2.0 apparently keep some eligible low-income people from enrolling and some enrollees from getting needed health care.

In particular, the evaluation casts serious doubt on whether Indiana’s HSA-like accounts meet the state’s goal to “promote the efficient use of healthcare, including encouraging preventive care and discouraging unnecessary care.” 

The Department of Health and Human Services (HHS) considers whether waiver proposals hold promise to strengthen coverage or health outcomes for low-income people, increase access to providers, or otherwise increase the efficiency and quality of care for Medicaid beneficiaries and other low-income people.  HHS says it won’t approve waiver proposals that would impose premiums or cost-sharing charges that would keep low-income people from getting coverage and care.  Indiana’s first-year evaluation shows that replicating HIP 2.0 would almost certainly erode Kentucky’s recent progress in expanding health coverage and improving access to care.