Former allies turn on Pence’s Healthy Indiana Plan

The National Center for Policy Analysis, an ardent supporter of "consumer-driven" health care, issued a blistering analysis of the Healthy Indiana Plan and Gov. Mike Pence’s proposal to expand it using Obamacare funds.

The Texas-based think tank until this month was run by John Goodman, a conservative economist who calls himself the father of health savings accounts.

Pence has touted HIP and his proposed HIP 2.0 as “consumer-driven” solutions to provide access to health care for low-income Hoosiers. The program creates health-savings-like POWER accounts for all participants, requiring those above the federal poverty limit to contribute some of their own money. It rewards them for seeking preventive care and penalizes them for unnecessary emergency room visits.

The Pence administration will ask the Obama administration later this month to let Indiana use HIP to expand coverage to about 440,000 low-income Hoosiers, using up to $17 billion over the next decade in funds approved by the 2010 Obamacare law.

“I have long advocated for the repeal of Obamacare. Yet Republicans have been talking for even more years about reforming Medicaid. That’s what we’re doing in Indiana,” Pence wrote in a May op-ed piece in the Wall Street Journal titled “The Smarter Way to Provide Health Care for the Poor.”

But Monday's report by the NCPA on the Healthy Indiana Plan says the program is light on “consumer-driven” elements and heavy on administrative overhead.

“Because HIP and HIP 2.0 have so few real incentives to encourage people to make wise health care decisions, their emphasis on tracking small payments and individual accounts may unnecessarily increase administrative overhead,” wrote Linda Gorman in the NCPA brief. Gorman is an economist and director of the Health Policy Center at the Independence Institute, a free-market think tank in Golden, Colo.

Gorman’s take now conflicts with previous pronouncements from the NCPA.

1. In a September 2011 policy brief for NCPA, Gorman cited HIP as a successful example of applying consumer-directed principles to low-income residents. She argued that the federal government allow all states to use such programs to cover most or all of their Medicaid populations, using a federal funding concept known as “block grants.”

2. In his 2012 book “Priceless,” Goodman included a brief description of HIP as a case study in how states had come up with better ways to serve low-income residents than the standard Medicaid program, even though he did not fully endorse the idea of block grants as the best way to reform Medicaid.

Goodman was recently fired by the NCPA board, allegedly for “sexual misconduct,” a charge Goodman has denied.

Gorman’s report on Monday found little to like in HIP. She faulted HIP for not requiring participants to pay more of their own money into the health-savings-like accounts that are the foundation of HIP. She said the co-pays HIP participants must make for unnecessary emergency room visits are too small and are charged only to about one in four HIP participants.
 
“One of the reasons that consumer-directed health care coverage has been successful in controlling costs without harming health is that people are spending what they regard as their own money. They benefit directly from finding ways to save, and they have an incentive to find innovative ways to use medical care,” Gorman wrote. But, “In HIP, the only reward for lower spending is lower required monthly payments when funds in a POWER account roll into the next year.”

She noted that only 12 percent of current HIP participants have met the requirements to have their payments reduced the following year. And, she added, “HIP 2.0 further weakens individual incentives to reduce spending by lowering required monthly payments.”

Gorman also poured cold water on one of the Pence administration’s main arguments for why HIP is better than Medicaid: that HIP participants have had lower ER use than Medicaid participants.

“Even the claims that HIP reduced emergency room usage are open to question. Although HIP members did use the emergency room at a lower rate than people in Indiana Medicaid, the lowest-income members visited the emergency room at roughly the same rate as regular Medicaid program adults,” Gorman wrote, implying that ER use might be higher among the aged, blind and disabled Hoosiers, which Medicaid covers but HIP does not. “It is impossible to determine whether the lower rate of emergency room usage was due to the HIP program or to other differences between the Medicaid and HIP enrollees.”

Gorman’s report joins a parade of conservative criticisms of Pence’s HIP 2.0 plan, although few of those have gone so far as to attack the original HIP plan. Those criticisms even hit the airwaves in Indiana last week, with the Florida-based Foundation for Government Accountability running radio ads against the HIP 2.0 plan.

“Governor Pence rode the anti-Obamacare wave to some of the highest positions of power in state and federal government,” the group’s president said in a statement last week. “Now, he sold his supporters down the river to become an Obamacare activist lobbying for Medicaid expansion in Indiana and across the country.”

In Indiana, Pence’s HIP 2.0 plan has received broad praise. It was negotiated with and has the support of the Indiana Hospital Association. And last week, Sen. Luke Kenley, R-Noblesville, encouraged Indiana's Democrat legislators to lobby their party colleagues in the Obama administration to approve the plan exactly as written.

"I think this plan is much more beneficial to the patient and the customer" than traditional Medicaid, said Kenley, according to the Associated Press. "I think there is a great opportunity. I hope the federal government will see fit to approve our waiver request the way it stands."