February 8, 2017

Spotlight on Medicaid Block Grants Amid Looming Changes to Healthcare

By

Now that the new presidential administration has taken office, we can expect some modifications to the Medicaid program as an entitlement arrangement. Currently, everyone who is eligible based on income compared to the federal poverty level is awarded a coverage spot for healthcare services. Will the Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA) continue in its current format, or will it be repealed or defunded by the new lawmakers in Washington, D.C.?

There will need to be a framework that has worked in various states that may be considered as a new option for various governors and state legislatures to consider. Will it be mandatory, or will it be modified since the concept of Medicaid block grants is a fixed funding arrangement? Will the Centers for Medicare & Medicaid Services (CMS) relinquish significant oversight, since the idea is to shift the entire financial risk to the states?

The state of Indiana has adopted the Healthy Indiana Plan 2.0 (HIP), which is a private market consumer-directed model with incentives for members to take personal responsibility to improve their health. The use of consumer-driven healthcare may increase competition in the marketplace as Medicaid beneficiaries become active in their healthcare decisions and providers compete to provide services. This will likely increase quality and allow insurance companies to compete for business and thus lower premium prices. A byproduct of this concept is that the majority of Indiana state employees have voluntarily elected to participate in this consumer-driven health plan option. The state has reported that it has saved almost 11 percent annually over the past four years in healthcare spending. The state employees have utilized hospital emergency rooms at reduced rates, have had fewer physician office visits, and experienced lower prescription drug costs due to higher generic medication dispensing rates and overall drug usage.  

How is the plan structured? In the HIP Plus plan, which appears to offer the best value for its members, benefits include inpatient and outpatient services as well as vision and dental coverage. There is no copayment for receiving services, with one exception. If a beneficiary utilizes an emergency room and it is determined that no true emergency existed based on medical necessity, then a coinsurance of $8 to $25 could be assessed. In this HIP program, the first $2,500 of medical expenses for covered benefits is paid with a special savings account identified as a Personal Wellness and Responsibility (POWER) account.

The state of Indiana contributes the majority of the funding this amount. The member is required to contribute to this health savings account (HSA) based on income and family size at the rate of about 2 percent of annual family income. If a member does not utilize the full $2,500 of healthcare expenses in a year, then the remaining contributions can be rolled over to the next year – and can be doubled if certain preventive services are completed. If annual expenses exceed $2,500, then the state covers all healthcare costs. The HIP covers Indiana residents between the ages of 19 and 64 who have family income at 138 percent of the federal poverty level or less and are not covered by Medicare or another Medicaid category.

New features that have been added currently include maternity benefits and 90-day refills on prescriptions with mail order availability. Another plan, HIP Basic, is a fallback option that is available to members with family household income less than or equal to the federal poverty level who do not participate in the POWER account concept, in that they make no annual contributions. The funds in the POWER account are contributed 100 percent by the state of Indiana. Essential inpatient and outpatient healthcare services are covered, but not vision and dental. Members pay a coinsurance that can range from $4 to $8 per physician visit, or prescriptions can be filled at rates as high as $75 per hospital stay. Members in HIP Basic are limited to 30-day prescription supplies and cannot utilize medications by mail. In addition, they are allowed fewer physical, speech, and occupational therapy services than those provided to members enrolled in the HIP Plus plan. A new feature recently added to the HIP is called Gateway to Work, which helps HIP members connect to the state’s workforce training programs, work search resources, and employers looking to hire additional employees. 

The state of Indiana has an existing waiver submission with CMS that is dependent upon enhanced federal matching funds and the continuation of Indiana hospital support for the HIP. The existing state cigarette tax revenue also contributes to the viability of this program. If the federal funding source is reduced during this waiver period, the Medicaid expansion will terminate for the newly covered population and the operation of the Medicaid program will revert back to the original entitlement design. 

We will see if CMS is instructed through legislation to develop regulations that encompass this approach in revamping the national Medicaid framework over the next year.

Stanley Sokolove, CPA, ALJ Emeritus

Stanley J Sokolove, CPA, is a former CFO technical compliance monitor for CMS. In that role, Mr. Sokolove provided oversight of the banking, finance and internal controls for CMS relating to NHIC, Corp., the DME MAC for Jurisdiction A. Prior to this position, Mr. Sokolove was an Administrative Law Judge, serving as a member of the Provider Reimbursement Review Board in Baltimore, Md. Mr. Sokolove is a member of the RACmonitor editorial board and makes frequent appearances on Monitor Mondays.

This email address is being protected from spambots. You need JavaScript enabled to view it.