State could implement Affordable Care Act without spending new money

2012-09-19T19:15:00Z 2012-09-20T10:24:05Z State could implement Affordable Care Act without spending new moneyDan Carden, (317) 637-9078
September 19, 2012 7:15 pm  • 

INDIANAPOLIS | Indiana could fully implement the Affordable Care Act and provide Medicaid health coverage to a half million uninsured Hoosiers for at least four years without requiring any new revenue.

Seema Verma, the state's health reform consultant, told a panel of lawmakers Wednesday that revenue from a 2007 cigarette tax hike used to fund the Healthy Indiana Plan for the working poor and state money currently spent on a high-risk health insurance pool could be repurposed to pay the state's share of an expanded Medicaid program, as called for in the Affordable Care Act.

Federal law requires states to expand Medicaid eligibility starting in 2014 to Americans earning up to 133 percent of the federal poverty level, which is $14,856 for an individual or $30,657 for a family of four. However, the U.S. Supreme Court ruled earlier this year that states can't be penalized for not following the law.

Expanding Medicaid eligibility to comply with the law would cost Indiana an average of $200 million a year from 2014 to 2017, according to state actuary Rob Damler, of Milliman Inc.

Verma said that four-year cost of Medicaid expansion could be paid using $278.3 million in HIP cigarette tax reserves and $334.8 million in projected 2014-17 collections, along with annual savings of $48.5 million from eliminating the state's high-risk insurance pool no longer needed because the Affordable Care Act guarantees coverage for pre-existing conditions.

After four years, the state's Medicaid expenses would increase as the federal government reduces the share of health costs it pays for new Medicaid participants. The federal share is scheduled to gradually drop to 90 percent by 2020 from 100 percent in 2014-16.

Damler said Indiana would need to find new revenue or reduce other expenses starting in 2018 to cover increasing Medicaid costs. He did not mention that Indiana has a budget reserve of $2 billion that's expected to grow due to a structural surplus.

On the other hand, if Indiana decides against expanding Medicaid eligibility the state would still face an $87 million annual increase in Medicaid costs starting in 2014, Damler said.

That's because currently eligible Hoosiers not on Medicaid are expected to obtain coverage to comply with a federal law requiring all Americans to have health insurance.

State Sen. Earline Rogers, D-Gary, a member of the Legislature's Health Finance Commission, said she fears partisan politics may prevent Indiana's Medicaid expansion. Many lawmakers in the Republican-controlled Legislature and Republican gubernatorial candidate Mike Pence vehemently oppose the health law they call "Obamacare."

"I regret that," Rogers said. "I'm in the position where the more people that we can provide health care to, then that ought to be the direction in which we go." 

State Rep. Charlie Brown, D-Gary, who sponsored the law creating the Healthy Indiana Plan, said he will fight to stop the money funding that program from being "dumped into the general fund" if HIP is not allowed to continue under the federal health law.

Currently, a Hoosier must earn less than 22 percent of the federal poverty level — that's $2,457 for an individual or $5,071 for family of four — and have limited assets to enroll in Indiana's Medicaid program.

State Medicaid spending totals about $1.8 billion a year, or 14 percent of the budget, and covers about 1.1 million low-income, elderly and disabled Hoosiers.

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