Waivers for IN still produce bad expansion deal for LA

Now that Indiana has made some accommodation to Medicaid expansion partly on its own terms, the question becomes whether this represents a sensible model for Louisiana to embark upon its own version.

As originally formulated, refusing to expand Medicaid through the misnamed Patient Protection and Affordable Care Act (“Obamacare’) was a no-brainer. Even under the most optimistic projections, when the federal government went from the 100 to 90 percent reimbursement rate by 2020, after that it would cost the state more money than without expansion and its continuing to rely upon provision of uncompensated care for those without insurance and ability to pay. By 2023 the cost to Louisiana would be $68 million annually, growing at a rate of almost 15 percent a year. This means in the decade of 2020-29 the state would pay an extra $858 million above and beyond what it could. (And you don’t even want to consider the most pessimistic projection, which puts additional decade costs around $4 billion.)

And, as it turns out, for care no better than that consumed or not by the uninsured. As the study known as the “Oregon health insurance experiment” demonstrated, Medicaid users in the aggregate on outcomes did no better than the same uninsured patient population. This points to the necessity of reforming the fee-for-service rationale behind Medicaid and the patient consumption behaviors that it causes.

Which was what Indiana tried to do with its waiver plan for expansion. After many months of negotiation, the federal government accepted a program that that requires some recipients to contribute to their insurance, copayments of $8 to $25 for emergency room care to discourage use of the more expensive health option (and which addresses that Medicaid expansion has increased ER use) and termination or penalties for those who don't pay their required payments. Required payments range from $1 to $27 per month, depending on income.

Significant differences with traditional Medicaid are the premium payments for some, the copayments, and the lockout penalty. But when comparing the typical nongovernment model where the payer (individual or individual and employer) pays a certain monthly premium and may be responsible for copayments or out-of-pocket costs to a traditional Medicaid plan where somebody shows up and pays nothing for whatever gets done, the Indiana plan looks much more like traditional Medicaid, for several reasons.

For one, if as expected most eligible recipients – essentially anyone under 100 percent of the federal poverty limit – choose the most basic plan, which still has a cornucopia of benefits required by the federal government beyond what Indiana already was offering under Medicaid prior to Obamacare, there will be no premium. Also, the lockout provision applies only for those making 100 to 138 percent of the FPL, and just for six months, with a host of loopholes. And for those who end up paying premiums, coverage begins immediately and in many circumstances even retroactively. Perhaps worst of all, not only does the program facilitate crowding out of private coverage, but also it extends to all able-bodied adults whether they work (the federal government continues to deny specifically a work requirement, either employment or workfare, in these waiver requests).

Unfortunately, the plan has two perverse incentives. While it has a health savings account aspect, the concept of which is designed to control costs by having individuals choose judiciously in their health care spending, as the most anyone would have to pay into it is just 13 percent of its total, and many will pay nothing, it will have little impact in inducing efficient use of taxpayer dollars. And because it has taken the form of an entitlement giveaway, it creates a disincentive to work, where the current, unexpanded version does exactly the opposite as it creates dynamics where working either gathers funds so that one can afford to get insurance instead of having to rely upon the exigencies of the uncompensated care system or this would be provided by an employer.

These features, while they make progress away from the traditional Medicaid model, do so insufficiently. Unless, as Gov. Bobby Jindal and gubernatorial candidate Sen. David Vitter argue, Medicaid changes dramatically towards a premium support or managed capitation system, the same wasteful dynamics producing inferior results will continue. But to introduce those elements that makes for more efficient and effective delivery of health care removes the prime objectives of the Pres. Barack Obama Administration’s rationale for Medicaid expansion – increased government control over people’s lives and redistribution of wealth, which is why Indiana had to settle for well less than half a loaf in its version of expansion.

Accordingly, plan parameters such as Indiana’s adopted by Louisiana would waste taxpayer dollars, do no good for recipients, and make just as foolish accepting Medicaid expansion under the current default rules. Policy-makers need to stay away from bad deals like this.