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Healthy Indiana 2.0 financing examined

Cigarette, hospital fees to pay state portion

– Members of the State Budget Committee took a detailed look Friday at how Gov. Mike Pence would pay for “Healthy Indiana Plan 2.0,” his proposal to expand insurance coverage using a state-run plan instead of traditional Medicaid.

Administration officials presented the proposal to the committee Friday. Pence is submitting the proposal to the federal Centers for Medicare and Medicaid Services later this month, as part of the process of requesting a waiver to the Medicaid expansion in the federal health care overhaul.

State Medicaid Director Joe Moser said the cigarette tax and an increase in the recently approved hospital assessment fee would cover the expansion's cost. The plan would cost about $18 billion over the next six years. The state would pay $1.5 billion and the federal government would pay $16.5 billion.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, praised the proposal.

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

He added, half-joking, that he hopes Democratic state lawmakers will push Democrats in Washington to support the plan.

Pence unveiled the proposal last month with much fanfare, saying that expanding the state-run Healthy Indiana Plan was a better alternative to expanding traditional Medicaid.

The presentation Friday gives one of the first detailed looks at how the state would finance the expansion.

The total price tag of $18 billion covers the time from Jan. 1, 2015, the estimated start date of the program, through June 2020. In the first full year of the expansion, fiscal year 2016, the program would cost $2.9 billion. The state would pay in about $100 million while the federal government would cover $2.8 billion.

The state's hospitals, which worked closely with the Pence administration in developing the plan, stand to be one of the biggest winners under the infusion of federal money to the state.

One of the largest changes the state would make, and perhaps the biggest driver of increased costs, is the plan's call to increase the Medicaid reimbursement rate. The figure accounts for how much hospitals and doctors are paid for seeing patients under the Medicaid program for the poor and is calculated based on the better-paying Medicare rate under the program for senior citizens.

If the expansion were approved, the state's Medicaid reimbursement rate would jump from 60 percent of Medicare to 75 percent. The increase would address an argument long-touted by conservatives, who say Medicaid is a failure, in part, because doctors will not accept patients they lose money treating.

Moser, the Medicaid director, told the panel that the number of Indiana residents insured through the program would steadily increase in the first few years from roughly 193,000 in the first year to roughly 458,000 by 2020.

“These folks won't all come in the door on day one,” he said.

The Pence administration is continuing its rollout of the proposal with the pending departure of one of its health care leaders: Family and Social Services Administration Secretary Debra Minott. She announced Monday that she was “transitioning” out of the job in the coming month, but did not explain her reason for leaving.

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