News & Commentary

Enhancing State Flexibility in Medicaid: Early Lessons From Healthy Indiana Plan 2.0

Thursday, March 16, 2017
Jennifer Kowalski
Vice President, Anthem Public Policy Institute

The piece below was originally published on AHIP.org

As policymakers debate changes to the Medicaid program, including the future of the Affordable Care Act’s Medicaid expansion, state flexibility will be one consideration. Many states that expanded Medicaid, as well as many others that did not, are seeking greater flexibility to design their Medicaid benefits in a way that better serves the needs of their residents.

Affording states more room to innovate can generate new insights on how to better serve Medicaid beneficiaries—with the potential for improving health outcomes and lowering costs over the long term.

Looking ahead, with an expectation that the Trump administration will support greater state flexibility, we can learn from states like Indiana that have already implemented Medicaid reforms. The Healthy Indiana Plan (HIP) 2.0—a program that applies private market, consumer-driven reforms to the Medicaid program—is now completing its second program year. Early results from the experience of Anthem Inc.’s affiliated Medicaid plan in Indiana (the “health plan”)* illustrate how states can use program flexibility to better engage Medicaid enrollees in their health care.

HIP’s design and incentives may feel complicated at first, especially for members who have never had insurance before. But we saw members were actively seeking out and receiving help to better understand their benefits. As one member expressed:

“I cannot tell you how amazing [the HIP Health Counselor] was to deal with, learn from, and plow the insurance road for me.”

Further, HIP members appeared to access primary and preventive care at greater than anticipated rates. While these observations reflect the intended results of the program, we dug into our data to confirm that the anecdotal evidence amounted to measurable trends. And in fact, the data demonstrated high levels of engagement among HIP 2.0 members, contrary to long-held assumptions that financial incentives, such as those integral to HIP 2.0, won’t influence Medicaid members.

Before getting to the results, here’s a quick overview of what makes Indiana’s HIP 2.0 unique among Medicaid reform efforts. HIP 2.0 draws on financial incentives to improve health outcomes and change consumer behavior—these incentives resemble ones commonly used in employer-sponsored insurance plans but rarely seen in Medicaid. Indiana implemented this benefit design through a waiver from the federal government permitting the state to modify its Medicaid program, within certain boundaries.

HIP 2.0 includes two major benefit plans: Basic and Plus. Members in either plan have access to all required essential health services including maternal health services. Basic is the default option for individuals with incomes at or below 100 percent of the Federal Poverty Level (FPL) who either opt out of Plus or fail to make the monthly contributions required in Plus (see below). Plus covers individuals with incomes up to 138 percent FPL; enrollees are required to make monthly contributions to a health savings account-style fund called the Personal Wellness and Responsibility (POWER) account. Plus members receive enhanced benefits over Basic including vision and dental benefits and, unlike Basic members, are not required to pay cost sharing at the time of service, with the exception of copays for non-emergency ER use.

One of the most revealing findings to date is the extent to which low-income individuals selected the Plus option, which requires contributions to their POWER accounts. Nearly 70 percent of HIP members chose to pay for the Plus option, including 65 percent of members with incomes less than or equal to 23 percent of the federal poverty level (FPL).

Our data also show members in the Plus option access their benefits and engage in their care at high rates:

  • Emergency room use among Plus members is 21 percent lower than ER use among Basic members. Plus members’ ER use is 30 percent lower than when they were enrolled in traditional Medicaid.
  • Plus members are more likely to seek preventive services, such as breast and cervical cancer screenings. About 39 percent of Plus members received a breast cancer screening (compared to 21 percent of Basic members) and 27 percent of Plus members obtained a cervical cancer screening (compared to 15 percent of Basic members).
  • Plus members are more likely to follow up on care, with 77 percent of Plus members obtaining appropriate follow-up care for use of an ACE inhibitor, compared to only 66 percent of Basic members.

Furthermore, members appreciate the opportunity to take ownership of their health care. For example, one member said the health plan care management program “changed his life” after he was connected to smoking cessation services. Members also talk about making contributions for Plus in ways that reflect their desire to be engaged – they are “allowed to pay” or “want to pay” for Plus – and they value the ability to choose the plan that is best for them.

The early results we’ve seen from HIP 2.0 challenge assumptions that Medicaid members can’t or won’t engage in their health care. In particular, Plus members are not only opting to pay for richer benefits but they also have become better consumers of health care—accessing primary and preventive care while reducing their use of the ER.

Although this model is still relatively new in Medicaid, HIP 2.0 is demonstrating the ways in which Medicaid program flexibility can produce positive outcomes for both members and the state. Other states may take a different path to Medicaid reform than Indiana, but the early results from HIP 2.0 illustrate how enhancing state flexibility can lead to more engaged consumers and better health care.

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