Rhonda Cree has diabetes, significant vision loss, and high blood pressure. Cree, 61 years old, is one of 65 million Americans who relies on Medicaid to cover her prescriptions and other healthcare costs. But Cree lives in the town of Logansport in north-central Indiana. Unlike most states, Indiana requires her to pay monthly premiums for Medicaid.
Last November, Cree and her husband were going through a particularly difficult time financially, and she was unable to pay her full monthly premium. The state stopped her coverage and barred her from reapplying for six months. During that time, Cree was forced to skip prescribed injections, and suffered more vision loss as a result.
Mike Pence’s plan is working exactly as he hoped.
Before Pence ascended to the national stage as Vice President and he recruited his longtime ally Seema Verma to lead the Center for Medicare and Medicaid Services, they together crafted a unique Indiana approach to Medicaid. Their goal was to reshape the 54-year-old program into something far smaller and more punitive. The Healthy Indiana Plan, they promised, would demand “skin in the game” from enrollees like Rhonda Cree.
Medicaid works as a federal-state partnership, with the federal government paying most of the cost and the states agreeing to follow guidelines set at the national level. All U.S. states have agreed to the terms, and Medicaid accounts for almost one-fifth of the country’s personal healthcare spending.
The platform for Pence and Verma’s ambitious remodeling of Medicaid was provided by the Affordable Care Act of 2010’s invitation to states to significantly expand their Medicaid coverage. Under the ACA, all adults in households whose income is less than 133% of the federal poverty level, a little under $17,000/year for an individual, would be eligible for Medicaid. But, in 2012, the U.S. Supreme Court in the case of National Federation of Independent Business v. Sebelius ruled that Congress did not have the authority to demand that states expand Medicaid, although states could do so if they wished. For Republican state officials like then-Indiana governor Pence, the ruling created a dilemma.
On one hand, Pence was a vocal opponent of the ACA and Medicaid. “We are going to use every means at our disposal to oppose this (ACA) government takeover of health care,” he said. Of Medicaid, he pronounced, “The sad truth is that traditional Medicaid is not just broke, it is broken.” But the ACA included a tantalizing offer for Indiana and other states: if they expanded Medicaid coverage as the new law called for, the feds would pay the full cost of the initial expansion, and 90% of the cost after that. Pence’s constituents, most notably the well-connected leaders of Indiana hospital systems that would benefit from more of their patients being covered by Medicaid, pushed him to accept the deal.
Caught between his ideology and political pressure, Pence turned for help to Verma, a former Indiana hospital administrator who had launched her own consulting firm. Verma had already gained a reputation for taking a conservative approach to public healthcare systems, earning contracts from multiple state agencies and private companies. She earned praise for avoiding the “fatal mistake of making everything free,” as Pence’s predecessor Mitch Daniels put it.
At Pence’s request, Verma took the lead in crafting a version of Medicaid expansion that would look less like a government program than a high-deductible insurance plan offered by the for-profit insurance industry. The Healthy Indiana Plan, Pence promised, would be a “hand-up, not a hand-out.” It would demand healthy behaviors and personal responsibility from low-income Hoosiers, or they would face dire consequences.
Premiums, Lockouts, and Copayments
Under the Medicaid Act, the U.S. Secretary of Health and Human Services can waive some Medicaid requirements for states that wish to experiment with new approaches, as long as those approaches promote the objectives of the overall program. In 2014, Pence and Verma asked for a federal waiver to implement their reimagined version of Medicaid.
Indiana wanted to accept the ACA Medicaid expansion offer of near-total federal funding, they said, but only if the state could require enrollees to pay monthly premiums to private insurance companies that contract with the state, and terminate non-compliant enrollees like Rhonda Cree, and lock them out of coverage for failure to pay. Pence and Verma also wanted to demand copayments, even for emergency services and even from the lowest-income persons on Medicaid.
Past Medicaid waivers had been granted to states seeking to make small tweaks to the program, but the Indiana terms were something far more sweeping. The Pence-Verma plan ran counter to decades of Medicaid practices, and to the research consensus that cost sharing for healthcare was often quite harmful, especially to persons with chronic illnesses. Imposing user fees on the poor has proven to be “a prescription for death,” says physician and Harvard Medical School instructor Adam Gaffney.
Now it was the Obama administration that faced a dilemma. After the Sebelius ruling, many other Republican-led states were refusing to expand Medicaid. Seventeen states still have not done so. Even the Healthy Indiana Plan’s restricted version would expand coverage to hundreds of thousands of people in the state. Indiana healthcare advocates did not like the punitive Healthy Indiana Plan approach, but told federal administrators that the Pence-Verma half-loaf was better than none. The Obama administration approved the waiver.
The Pence-Verma version of Medicaid fulfilled each side’s predictions. The Healthy Indiana Plan has covered as many as 400,000 persons, most of whom otherwise would not have healthcare coverage at all. But, in the first two years of the program, over 70,000 people who failed to make premium payments were either kicked off coverage or never able to start coverage at all. Amber Thayer, a homeless Indianapolis mother of an infant child, was removed from coverage after her premium payment went to the wrong insurance company. Thayer was forced to spend weeks buying her medication one dose at a time, a new purchase every day, because that was all she could afford.
Next week: In Part Two of two, Pence and Verma ascend to the national stage, and push their Indiana version of Medicaid to be the national model, adding in restrictive work requirements to an approach designed to undercut the Affordable Care Act their boss has vowed to destroy.