The Healthy Indiana Plan

Setting the Stage for the Rising Cost of Medicaid

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People tend to think of Medicaid as a free resource, but in reality, this has not been the case. Cost sharing has always been part of the process, and each state has a limit for how much it will pay. In some states, people have to pay premiums each month. The Healthy Indiana Plan is one of the first programs to do this, and it is setting an example for the rest of the nation.

Therapist discussing with women in waiting room
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Funding for Medicaid

When Medicaid was created in 1965, it was intended to offer healthcare to those who could least afford it, namely the poor, pregnant, and disabled. With the passage of the Affordable Care Act (Obamacare) in 2010, the definition of what it meant to be poor changed. Modified-adjusted gross income (MAGI), as opposed to strictly income and assets, determines whether someone is eligible for Medicaid.

Whether or not a state chose to expand Medicaid (37 states including the District of Columbia have done so), more people are covered by the program than ever before. However, with increased enrollment in Medicaid, many states are struggling to keep up financially. This may worsen if the Trump administration succeeds in cutting funding for the program by changing from federal matching to block grants or per capita limits. With states looking for innovative ways to save money, the public eye is turning to Indiana.

The state's Medicaid program, the Healthy Indiana Plan, charges people monthly premiums to be on Medicaid, and then it takes away their coverage for six months if they fail to pay on time.

Are more states going to charge people for Medicaid? Are more people going to lose coverage as a result? More precisely, should states add financial burdens for people with low incomes?

Cost Sharing

By definition, cost sharing means that both the person receiving care and the insurer (in this case Medicaid) contribute to healthcare costs. These out-of-pocket expenses may include copayments, coinsurance, deductibles, and/or premiums. Although Medicaid programs are not allowed to charge for emergency services, family-planning services, pregnancy-related care, or preventive care in children, they can charge for non-emergency use of the emergency room. They also have the option to charge copayments for office visits, hospital visits, and medications.

However, not everyone is subject to Medicaid cost sharing. American Indians or Alaskan Natives who receive care from the Indian Health Service or tribal health programs, children under 18 years old, people living in long-term institutions, people requiring hospice care, or women in the Breast and Cervical Cancer Treatment Program are exempt from those out-of-pocket costs.

Medicaid, however, can charge premiums for anyone earning at or above 150 percent of the federal poverty limit. They can also require payment from people eligible for Medicaid under the Ticket to Work Act, disabled children eligible under the Family Opportunity Act, and medically needy individuals (people with high medical needs who do not meet Medicaid eligibility by income criteria).

While out-of-pocket costs are generally low, states are looking to increase the proportion of cost sharing allowed under the law by applying for Medicaid 1115 waivers.

Medicaid 1115 Waiver

Medicaid programs across the country are changing because of the Medicaid 1115 waiver. These waivers, allowed under the Social Security Act, allow states to propose changes to the Medicaid program that were not introduced in the original law. This allows for innovation in the program. It may even allow different service and payment models that could not only save money but improve patient care.

This does not mean that states can do whatever they want. Medicaid 1115 waivers must be approved by the United States Secretary of Health and Human Services.

One of the conditions for these waivers is that they remain budget neutral to the federal government. They can last as long as five years and must then be renewed. 

As of March 2020, states have used waivers for a wide range of purposes. Whether they affected eligibility, altered cost sharing, changed benefits, expanded coverage, or modified provider payments, 54 waivers have been approved across 42 states with 25 additional waivers pending.

More states are now looking to add premiums and monthly contributions as a requirement for Medicaid. In Indiana, premiums are required for all enrollees, although there are different penalties for non-payment depending on someone's income level. These premiums are above the amount set by federal law.

The Healthy Indiana Plan

The Healthy Indiana Plan, the state's Medicaid program, has guided Medicaid reform on many levels. It has eliminated retroactive Medicaid eligibility—coverage on the plan begins the date the application is approved, not 90 days before the application was placed.

The Healthy Indiana Plan imposes work requirements (but does not enforce that requirement until a federal lawsuit is resolved), and it charges everyone a fixed monthly premium regardless of income.

The poorest people according to the plan, or those earning less than 22% of the federal poverty limit (FPL), pay $1 to $1.50 per month depending on whether or not they smoke. Those earning 23 to 50% pay $5 to $7.50, those earning 51 to 75% pay $10 to $15, those earning 76 to 100% pay $15 to $22.50, and those earning 101 to 138% pay $20 to $30.

Enrollees earning 101% or more of FPL will have their Medicaid coverage canceled if they fail to make their payments within 60 days. The process of re-applying for Medicaid adds an extra waiting period before coverage benefits begin again. As a result, approximately 25,000 adults were disenrolled from the program between 2015 and 2017 for failure to pay their premiums.

While people earning less than 100% of FPL will not be disenrolled from Medicaid if they fail to make timely payments, their benefits will be decreased. They will no longer be eligible for vision, dental or chiropractic services. With the exception of preventive services, they will be required to pay copayments for services that were fully covered beforehand. These added out-of-pocket expenses add up quickly, especially for someone who was not able to pay the $1 monthly premium in the first place.

A Word From Verywell

States are using Medicaid 1115 waivers to change who is eligible and what is covered under the Medicaid program. Whether it relates to work requirements or cost sharing, concerns are raised that healthcare is being taken from people when they can least afford it and perhaps when they need it most.

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Article Sources
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  1. Kaiser Family Foundation. Status of State Action on the Medicaid Expansion Decision.

  2. Centers for Medicare & Medicaid Services. Out-of-Pocket Cost Exemptions.

  3. Centers for Medicare & Medicaid Services. About Section 1115 Demonstrations.

  4. Kaiser Family Foundation. Medicaid Waiver Tracker: Approved and Pending Section 1115 Waivers by State. Updated Mar 10, 2020.

  5. U.S. Department of Health and Human Services. U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs.

  6. State of Indiana. POWER accounts.

  7. Kaiser Health News. Indiana Medicaid Drops 25K From Coverage For Failing To Pay Premiums. Published February 1, 2018.

  8. State of Indiana. Frequently Asked Questions.