Senior Policy Analyst
When it recently extended Indiana’s Medicaid waiver for three years, the Centers for Medicare and Medicaid Services (CMS) let the state raise monthly premiums for Medicaid enrollees who smoke. Indiana claims this policy will test whether a premium surcharge will convince smokers to quit, but evidence shows that, instead, it will likely reduce the number of people who sign up for coverage without changing the smoking habits of affected enrollees.
When Indiana expanded Medicaid as part of the Affordable Care Act (ACA), it did so through a waiver — the Healthy Indiana Plan (HIP) — that includes two types of coverage: HIP Plus and HIP Basic. People above the poverty line can only enroll in Plus and must pay a monthly premium or lose coverage. If people below the poverty line who are enrolled in Plus don’t pay their premiums, they’re moved from Plus to Basic, which offers fewer benefits and requires co-payments for most forms of care. This premium structure has caused fewer Hoosiers to enroll in coverage than would have if the state had simply expanded Medicaid under the ACA without a waiver. Charging smokers more will likely further depress enrollment.
The waiver extension lets Indiana raise the premiums of Hoosiers in HIP Plus who smoke by 50 percent if they don’t quit after they’re in the program for a year. (For example, a single person with monthly income of about $500 would see his monthly premium rise from $10 to $15; a single person with monthly income of about $1,000 would see her premium rise from $20 to $30.)
A key study examined a similar tobacco surcharge policy for enrollees in marketplace coverage. Under the ACA, states can let insurers charge smokers in marketplace coverage premiums that are 50 percent greater than non-smokers. The authors’ findings are striking: the marketplace surcharge reduced health coverage among smokers by as much as 11 percentage points, but didn’t get smokers to quit.
Rather than imposing a penalty on smokers that will likely lead them to drop coverage, Indiana and CMS should have heeded the evidence that Medicaid coverage helps smokers quit when it provides comprehensive smoking cessation supports without financial penalties. When Massachusetts began offering behavioral counseling and covering tobacco cessation medications to Medicaid beneficiaries, the smoking rate among those eligible for the benefit fell by 10 percentage points in two years. Indiana also offers a similar benefit to its Medicaid beneficiaries.
Smokers take a long time to quit; they often make up to 30 attempts before they succeed, research shows. Nevertheless, Indiana will apply the surcharge if a smoker doesn’t quit within a year, which will make it harder for them to maintain their coverage and its cessation supports while they’re trying to quit.
HIP is a demonstration project under section 1115 of the Social Security Act, which means the state must offer a hypothesis about how its changes to Medicaid will improve health care delivery to low-income people. Yet in approving Indiana’s waiver, CMS ignored evidence that raising smokers’ premiums doesn’t improve their health. Facing higher premiums, fewer smokers will likely maintain their coverage, denying them their needed cessation supports.