State Medicaid Waiver Programs are Getting Complex

State leaders are getting more creative with their plans for how to expand Medicaid under the Affordable Care Act as they move away from traditional Medicaid programs, but they might be making it harder for those plans to be carried out.

The Affordable Care Act gave states the option to expand Medicaid coverage to people who earn up to 138 percent of the federal poverty level. Several states have filed what are known as Section 1115 waivers which allow states to put their own spin on expansion. The waivers must be approved by the U.S. Department of Health and Human Services before implementation.

Jesse Cross-Call, a policy analyst with the Center on Budget and Policy Priorities, said Arkansas was a trailblazer in Medicaid waiver design. Cross-Call was one of the featured speakers on a recent CSG eCademy webcast, “The Latest on Federal Medicaid Waivers.

Arkansas’ waiver, which came to be known as the private option, uses federal Medicaid funding to pay for health insurance plans sold on the state health insurance exchange for eligible parents and childless adults. The waiver was approved in September 2013.

“Really, the Arkansas waiver changed the ballgame,” Cross-Call said. “It really made the discussion of Medicaid expansion a discussion about waivers. What we have seen is that post-Arkansas and continuing to this day (is) states are really looking to put their stamp on expansion.

“You can tell this by the names they they’re giving their programs. It’s the Arkansas Private Option, the Healthy Michigan Plan, Healthy Indiana Plan, the New Hampshire Health Protection Program, Healthy Utah. The states are not talking about adopting Medicaid expansion; they’re talking about whether to pass Healthy Utah or Insure Tennessee.”

Indiana is one of the states looking to expand Medicaid its own way. It became the latest state to implement a waiver plan, which took affect on Feb. 1. It joins 27 other states plus the District of Columbia in expanding Medicaid.

Rep. Ed Clere, chair of the Indiana House Public Health Committee and co-chair of the CSG Health Public Policy Committee, said the state’s waiver builds upon an existing waiver program called the Healthy Indiana Plan, also known as HIP. The original waiver program enrolled 40,000-60,000 residents and was paid for by cigarette tax money, Clere said.

“The original HIP program and now HIP 2.0 that was built on it follow a consumer-driven approach to health care,” he said. “Each participant has a POWER Account, which is sort of a health savings account. … It’s an account that tries to teach folks about making decisions regarding their own health care spending.”

Indiana’s plan has two types of programs, a HIP Basic and a HIP Plus.

“HIP Plus requires more responsibility from the individual participant in terms of making contributions to the POWER Account,” Clere said, “and in return, they received enhanced benefits, including dental and vision. Our Medicaid expansion population is up to about 400,000 people (potentially) and enrollment has been brisk.”

Cross-Call said the federal government has set up some rules regarding what they will accept in Medicaid waivers since even the waivers must follow basic Medicaid federal law. Premiums, he said, can be touchy. People whose incomes are below the federal poverty line cannot have their health insurance coverage taken away because they cannot pay premiums.

“States are trying to tie eligibility for Medicaid coverage to whether a person is working or engaged in a work search activity,” Cross-Call added. “(Health and Human Services) has made it very clear that Medicaid is a health care program and its purpose is to extend health care to individuals. It’s not a driver to get people to work.”

But Cross-Call said some states are finding a way to link Medicaid recipients to job placement programs. New Hampshire and Indiana have set up systems where applicants are referred to a state-run job search program upon applying for and gaining Medicaid coverage. Applicants’ coverage is not conditional on participation in the program, he said, but referrals are included.

Cross-Call said complex Medicaid expansion programs make it harder for states to both implement and measure the program’s effectiveness.

“I think that there is a question about whether these waivers are making it harder for people to enroll in coverage, to maintain coverage,” he said. “But I think it also places a burden on the states to administer these HSA-like accounts that Indiana is setting up and Michigan as well.

“We’re seeing already that some states have got a little bit of cold feet around it (health savings accounts). In Arkansas, for example, they thought about imposing accounts in the second year, but they scrapped this idea because they realized the state was going to have to spend a lot of money to administer those accounts.”

In Pennsylvania, new Gov. Tom Wolf—inaugurated in January—canceled his state’s Medicaid waiver expansion, choosing instead to go with expanding eligibility for the state’s existing program to save high administrative costs, said Cross-Call.

View the recorded eCademy webcast here.