In 2015, Indiana Gov. Mike Pence announced that the Centers for Medicaid and Medicare Services had approved the state's waiver to try a different approach for Medicaid. Credit: Photo courtesy of Indiana University Health

Two years before Mike Pence kicked off his term as vice president with a pledge to repeal the Affordable Care Act, the former Indiana governor announced an agreement with the Obama administration to bring the national health law’s benefits — and billions in federal dollars — to his home state.

By that time in 2015, “Obamacare” was already a dirty word in Republican-controlled Indiana. And even as he spent months negotiating with the federal government on a waiver to expand Medicaid, Pence took pains to publicly denounce the very law that made the expansion possible.

“We’ve been saying no to government-driven health care — Obamacare,” then-Gov. Pence said in a video announcing the state’s expansion of Medicaid, the health insurance program for the poor.

As pressure builds for Mississippi to join 38 other states in expanding Medicaid, Indiana stands out as both a potential model and a cautionary tale.

Since expanding Medicaid in 2015, Indiana has provided government-sponsored insurance to nearly 600,000 adults that were too poor to afford private insurance, but made too much money to qualify for traditional Medicaid.

Accomplishing the feat in deep red Indiana meant navigating a political minefield. The federal waiver allowed Pence and the Republican state legislature to brand their program as a conservative version of Medicaid expansion, distancing themselves from “government handouts” and the specter of Obamacare in the process.

The political smoke screen has been so effective that many of the program’s recipients don’t even know they’re on Medicaid — much less Obamacare.

Joan Alker is a Georgetown Researcher. Credit: Photo courtesy of Georgetown University

But while health experts say the benefits are indisputable — more coverage, better health and more financial stability for struggling rural hospitals — they also point to costly trade-offs. Many of the conservative wrinkles that enabled the program’s passage through the Republican-led legislature have been ineffective — or worse. In some cases, researchers say; they’ve actively worked against the goal of improving public health.

“At the end of the day, it’s really important that Medicaid expanded in Indiana, and that’s a good thing,” said Joan Alker, a Georgetown University professor who studies Medicaid expansion. “But all these bells and whistles resulted in more red tape, administrative costs and no real benefits in health outcomes — and negatives in terms of people losing their coverage.”

A ‘hand up,’ not a ‘handout’

While Pence’s awkward embrace of Medicaid expansion attracted the national attention, a prior Republican governor of Indiana laid the groundwork.

In 2005, former Gov. Mitch Daniels — now the president of Purdue University — created the original Healthy Indiana Plan, or HIP, which extended a version of Medicaid to some low-income adults that earned too much to qualify for coverage. Its reliance on state tobacco funding, though, limited its reach. The pilot program enrolled a few thousand at first, topping out at around 70,000 at its peak in 2014.

What made HIP unique — and later served as the foundation of Indiana’s Medicaid expansion — was that it offered two tiers of health insurance. HIP basic, which met minimum federal Medicaid requirements, and HIP-plus, which provided better benefits, dental and vision. The catch was that to qualify for the better plan, low-income recipients had to make small monthly contributions into health savings accounts.

The thinking was that requiring recipients to have “skin in the game” would make them more invested in their own health. That mantra reappeared both in the design of Indiana’s 2015 expansion of Medicaid, and in how it was sold politically. In his announcement 10 years later, Pence said that unlike traditional Medicaid, Indiana’s program was “grounded in personal responsibility.” Recipients, he added, were “hardworking Hoosiers who don’t need a handout — but they could use a hand up.”

Mark Fairchild, the policy and communications director at Covering Kids and Families of Indiana, said branding Indiana’s program in this way was critical to its success — not just at the legislature, but also in convincing skeptical residents to sign up.

“Very few people who are on it are going to say they’re on Medicaid,” said Fairchild, whose organization advocates for health coverage and helps people sign up. “They say they’re on HIP, they’re on Healthy Indiana. … We’ve had people say ‘I’m not going to sign up for that Medicaid or that Obamacare, but I’ll sign up for HIP.’ ”

Building on an existing program offered another advantage, as well: state officials had proof that expanding coverage was a good deal. HIP’s pilot program was already achieving key goals like reducing uncompensated care and diverting people from emergency rooms who could be cared for by primary care doctors at a much lower cost.

The resulting bipartisan support for the program comes in stark contrast to states like Mississippi, where Medicaid spending is viewed as government waste to be cut.

“I haven’t had a conversation in a long time where anybody’s suggested decreasing the funding,” Fairchild said.

HIP’s pros and cons

Like other states that expanded Medicaid, Indiana’s program covers adults making up to 138% of the poverty line. That’s up to $17,829 for an individual or $36,590 for a family of four. (For context, pre-expansion Medicaid cuts off at the federal poverty line, or $12,880 for an individual.)

Credit: Bethany Atkinson

“It was really created to say we don’t have an option for these folks,” Fairchild says. “If we don’t keep them healthy, they’re not going to be able to re-enter the workforce.”

In a typical year, Indiana provides health coverage to around 400,000 people through HIP — a figure that surged to 575,000 last year due the pandemic and the recession. The impact to the state budget has been minimal. The federal government covers 90 percent of the costs, and the state’s share is primarily funded through a hospital assessment fee that the Indiana Hospital Association supports paying.

Still, while it has provided extensive coverage, HIP has also come under fire for the very changes that made it politically palatable to conservatives: None more so than the so-called “lockout” provision, which kicks people off their insurance for three months if they miss required payments to their health savings accounts or fail to complete certain paperwork.

For some, the cost itself might be a barrier. The premiums are anywhere from $10 to $40 a month, with tobacco users required to pay extra as an incentive to quit smoking. But the bigger issue, Fairchild says, is that the program just has too many complicated rules for people to follow.

“The more requirements, the more layers we add to it for people to do,” Fairchild said. “It’s easy for them to mess up and have the potential to be removed from the program.”

Early on, the payments were tied so strictly to income that someone’s earnings could fluctuate by a few hundred dollars and they’d get knocked out of compliance without realizing their payments were supposed to increase from say, $10 to $10.75 per month. Now, the payments are based on income tiers to provide more leeway.

But people still make mistakes. The Indiana Family and Social Services Administration, which administers Medicaid, did not immediately respond to a request for the latest lockout figures. But in the program’s first two years, 10,000 recipients lost coverage for failing to pay monthly premiums, and another 46,000 lost coverage for not even making their first payment, according to federal filings.

Alker, the Georgetown researcher, says the payments do more harm than good.

“There’s really no good rationale for it,” says Alker, who runs the Center for Children and Families at the Georgetown Health Policy Institute. “It essentially forces people to be uninsured for an amount of time because they didn’t send a form back or their form got lost in the mail or things like that.”

Low-income people tend to rent, and move frequently, causing notices to get sent to the wrong address. And the worst consequences of dropped coverage are exactly the sort of costly health crises that Medicaid expansion is supposed to help prevent.

“If you’re able to get your medicine for hypertension and control it, that’s cheaper than winding up in the emergency room with a stroke,” Alker said.

The state put another disputed provision, the work and community engagement requirement, on hold while it faces a court challenge. But early tests by the state suggested that, like the monthly payments, it could cause people to lose their coverage simply out of ignorance. Under the rule, recipients have to show proof that they’re working, looking for a job or participating in another qualifying activity like volunteering or caregiving.

“It’s one of those issues that the state will say that the requirements aren’t that tough,” Fairchild said. But when the state tried to implement it, officials found that most people “hadn’t even logged in to set up an account yet.”

Kosali Simon is a professor at Indiana University. Credit: Photo courtesy of Indiana University

Moreover, things like work requirements and the lockout provision can be a bureaucratic nightmare to enforce.

Using public benefit programs as an incentive to promote personal accountability “sounds great in theory,” says Kosali Simon, an Indiana University professor who studies health economics and policy. “In the end, it ends up being a huge cost to state taxpayers to send all these notices, and figure out how to get this money back.”

Lessons for Mississippi

If Mississippi follows in Indiana’s footsteps, even those who support HIP say it shouldn’t be copied verbatim.

Fairchild’s advice to Mississippi is twofold: Simpler is better, and outreach is essential. Funding for federal “navigators,” like Fairchild’s organization, that help people sign up and show them how to stay in compliance has been slashed in recent years, a period that has coincided with uninsured rates creeping back up after years of decline.

Experts say the lack of outreach, coupled with complex administrative requirements, has likely hurt African Americans the most, exacerbating existing racial inequalities.

“I think it affects everybody, but the concern I’ve heard the most is the Black population,” Simon said. “Everything that’s put as an additional requirement, where you have to do something active that requires resources, it’s going to have disparate impacts because of the way resources are distributed” unevenly across different races.

Still, despite the criticisms, health experts say the good has far outweighed the bad.

“There’s literally over 400 studies now showing the value of Medicaid expansion in so many different ways,” Alker says.

National studies show that expansion increases coverage and improves people’s health. It has reduced uncompensated care, which occurs when people show up in the emergency room without insurance, leaving hospitals footing the bill. It has also been a financial lifeline to rural hospitals.

Since 2010, only one rural hospital has closed in Indiana, compared to five in Mississippi, according to the North Carolina Rural Health Research Program. Among the six states with the most closures in that period, none of them has expanded Medicaid.

Indiana’s program, even with its drawbacks, compares favorably to more traditional expansion states in its effect on health coverage, says Simon, the IU professor.

In research published in 2018, Simon and her colleagues found that Indiana’s coverage gains under HIP were actually larger than those in some other states — although they were smaller than that of neighboring expansion states. As of last year, 10.3% of non-elderly people in Indiana lacked health care, down from 13.8% in 2014, before the state expanded Medicaid.

“The heart of it is the same,” Simon said, “whether the little features here and there are different.”

This report was produced in partnership with the Community Foundation for Mississippi’s local news collaborative, which is independently funded in part by Microsoft Corp. The collaborative includes the Clarion Ledger, the Jackson Advocate, Jackson State University, Mississippi Center for Investigative Reporting, Mississippi Public Broadcasting and Mississippi Today.


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