NASHP: Medicaid buy-in programs increase as states find they can reduce the uninsured
A literature review, state survey, and expert meeting to look at the design and operation of Medicaid buy-in programs as a way to cover the uninsured have found that such programs have increased in both number and enrollment in recent years, and states have demonstrated that they can design and implement participant buy-in programs using existing waiver mechanisms.
Neva Kaye, the program director for the National Academy for State Health Policy (NASHP), authored the study for that organization. She says a debate on the role and purpose of Medicaid could help clarify what changes to the program would be beneficial for the future.
Ms. Kaye tells State Health Watch that among the many proposals being floated as ways to deal with the problem of the uninsured, expanding Medicaid buy-ins is very feasible, especially for use with low-income populations. She notes there would be a financial benefit in increasing the pool of Medicaid insured by allowing people to buy in, and also points out that these are programs that have been carried out for some time with good track records, and thus are ready to be broadened.
For purposes of this study, Medicaid buy-in programs were defined as any program in which participants pay a prospective fixed premium or other kind of fee, such as an enrollment fee, to participate in Medicaid. Medicaid programs in many states have experience charging and collecting premiums from participants, who typically have higher incomes than Medicaid participants who are not charged premiums. Most of the participants who pay premiums are in states with Section 1115 research and demonstration waivers that permit the states to waive the typical Medicaid prohibition on charging premiums. And some premium paying participants are working disabled people who ordinarily earn too much to qualify for Medicaid.
Many of the concerns related to Medicaid buy-in programs don’t deal with specific issues involved in charging and collecting premiums, but rather to other elements in the Medicaid rules that cause barriers to the success of such programs, Ms. Kaye says.
The NASHP study reports the literature search conducted as part of the research found:
- As premiums increase, enrollment falls predictably, with the greatest enrollment occurring when premiums are set at 1% or 2% of the income of the target population.
- Those who enroll are different from those who don’t, with those not enrolling having lower income, less education, and being members of a minority group.
Under federal law, according to Ms. Kaye, there are five authorities for state Medicaid agencies to charge premiums or enrollment fees — Section 1115 waivers, work incentives under the Balanced Budget Act of 1997 and the Ticket to Work and Work Incentives Improvement Act of 1999, Transitional Medical Assistance, certain pregnant women and infants, and medically needy pay-in spend-down options. The only one of these authorities not reported by any state was charging premiums to certain pregnant women and infants.
The survey of states found that 29 states reported 41 programs in which some or all participants must pay a premium or enrollment fee to participate in Medicaid. The majority (54%) of programs that charge premiums are Work Incentive programs. The majority of people (97%) who pay premiums or enrollment fees to participate in Medicaid do so under Section 1115 waivers.
A total of 471,856 Medicaid beneficiaries were in buy-in programs in May 2002. In most states with programs, buy-in participants represented only a small percentage of all Medicaid participants. In 32 of the 41 surveyed programs, buy-in participants represented less than 1% of total Medicaid enrollment in the state. The remaining nine programs had enrollment representing more than 1% of total Medicaid enrollment, and two programs (MinnesotaCare and TennCare) accounted for 70% of total buy-in participants nationwide.
Most programs that require participants to pay for Medicaid are fairly new, with 54% implemented in the last two years, Ms. Kaye says. The majority of programs that charge premiums or enrollment fees apply them to working people with disabilities. She adds that when the analysis is limited to Section 1115 waivers, which serve 97% of those who must pay to participate, adults are the most likely group to be required to pay for participation.
Among all 41 programs, Medicaid agencies reported being most likely to begin charging premiums at 150% of the federal poverty level. Among work incentive programs, the most frequently reported threshold for premium payments also is 150% of the poverty level, with the second most frequent threshold level being "any who would not otherwise qualify for Medicaid."
In the Section 1115 waiver programs, the most frequently selected income threshold for premium payment was "anyone who not otherwise qualifies for Medicaid." Two of the programs begin charging premiums at differing levels of income for different groups of program participants. Programs most frequently reported using a sliding schedule based on income to determine individual payment level. The range in premiums charged was large, going from a low of $4 per child per month to a high of $1,375 per family per month. But Ms. Kaye’s report says the range in incomes of the eligible population also was diverse.
Most states (36) use a state agency to collect premiums, while seven use an external contractor and two use local eligibility offices. States typically mail their bills two to four weeks before payment is due, and payment is due either a couple of weeks before or after coverage starts. Late notices typically are sent two weeks later. Some states follow-up with phone calls, and termination for nonpayment can occur from one week to four months later.
Programs most often said they charged buy-in participants to "offset the cost of the expansion" and to "promote personal responsibility." Some 32 of the programs rated their premium collection programs as successful, while five said they could not rate collections as either successful or unsuccessful. When asked to name the top two barriers to success, technical/billing systems/operations was named in 23 programs, client understanding as a barrier in 11 programs, failure to pay in five programs, and insufficient staff in three programs.
Ms. Kaye says that when 28 staff from various states were brought together by NASHP to discuss the potential of using Medicaid to collect premiums and help insure the uninsured, they soon found that while many states have experience and capability to charge and collect premiums and fees, there are other issues in Medicaid rules and regulations that need to be addressed before they can design truly effective programs for uninsured state residents who can afford to pay a premium.
For instance, Oregon is redesigning some aspects of its Medicaid program and considering cutting back on benefits. The state obtained a waiver in October 2002 to expand its coverage of adults from 100% of the federal poverty level to 150%. But it can afford to do that only by offering a benefits package comparable to small employer coverage, with fewer benefits and higher cost sharing than traditional Medicaid coverage. State officials have said they are worried about both crowd-out and adverse selection as a result of the expansion.
Minnesota charges premiums to those between 175% and 270% of the federal poverty level, with premiums ranging up to 7% of income. The state has found that enrollment is most attractive for older enrollees and people with health conditions. They are required to be uninsured for four months before joining the buy-in, to prevent them from dropping private coverage. The state has a rule that if an employer pays 50% or more of a person’s coverage, he or she cannot join, but officials say they now are seeing more people who cannot afford the $200 to $300 per month to pay their share of private coverage. Officials also think there is a need to increase the $3 copayment on prescription drugs.
Few problems getting premiums
Officials in Minnesota report few problems in collecting premiums, and say the most efficient way appears to be making automatic deductions from bank accounts using debit cards. In coordinating Medicaid and employer coverage, they have found that employers do not want to be closely involved with their employees’ public coverage and do not want to know what their employees’ family incomes are.
Rhode Island officials reported they have found that more children enroll when parents also are eligible. The state has released a study of what happened to people who did not pay their RIte Care premium and were disenrolled. After the program began to charge premiums of $43 to $58 per family per month in January 2002 to enrollees earning between 150% and 200% of the federal poverty level, 82% still were enrolled in July 2002 and 18% had been dropped because of failure to pay. The survey showed that half of those who were disenrolled became uninsured. Those who did not pay and became uninsured were more likely to have a chronic condition and to use hospital emergency departments for primary care than were those who found other health care coverage.
To address a concern about potential crowd-out (people dropping private coverage to enroll in the state program), Rhode Island requires RIte Care enrollees who have employer coverage available to them to enroll in the employer’s coverage. There is a premium assistance program that pays subsidies directly to the enrollee to help pay the employee share of the premium. The state does not impose a mandatory period of uninsurance because it wanted its policies to promote health insurance coverage rather than separate people from coverage.
Rhode Island officials say changes need to be made in two federally imposed obstacles to more efficient coordination with employer coverage. First, they say, states need the authority to collect health insurance information from both large and small employers that now cannot be obtained because of Employee Retirement Income Security Act (ERISA) restrictions. And federal Medicaid eligibility rules should be simplified so there is one income level below which everyone qualifies for Medicaid and above which states may offer a commercial insurance-like package.
Mississippi officials identified another federal obstacle to premium assistance programs. When someone is found eligible for Medicaid premium assistance, the determination typically doesn’t trigger an open-enrollment period in the employer plan. Instead, the applicant must be provided with regular Medicaid for the months before the employer’s open enrollment period, and procedures must be put in place to switch the coverage during that open-enrollment period. Maryland officials said they had experienced similar problems, although Maryland law allows Medicaid and State Children’s Health Insurance Program eligibility to create an open enrollment for small businesses, but does not cover large self-insured employers, which are exempted by ERISA.
Some states advised that the description of Medicaid health benefits should be simplified to make premium-assistance programs more successful. They said the level of detail specified by a Medicaid benefit package is not a good fit with current employer benefits packages. The mismatch in terminology and detail makes it complicated to define and offer wraparound coverage, and makes it difficult to explain the program to employers.
During the discussion, it was noted that many states have spent considerable time and effort to collect premiums from individuals and coordinate with employers, but in many cases the total value of the premiums collected was very low. This led to a discussion of whether collecting premiums was worth the effort or whether it would be better to impose a moderate copayment on something like prescription drugs rather than collect premiums.
Value of copayment doubted
Washington state has experience with that kind of trade-off. Officials there considered more substantial copayments on prescription drugs for public employees, but recognized a need to be cautious so that the copayment did not pose a financial barrier to people getting needed drugs. Also, when the state implemented a copayment on drugs for Medicaid in 1993, pharmacists ended up absorbing the costs if patients were unable to afford the copayment, and the copayment was discontinued within seven months.
Officials from Oklahoma reported their state is considering whether to create a program that expands coverage by charging premiums for some Medicaid recipients. They can’t expand the program with a traditional Medicaid benefits package and would like to use a commercial insurance-like package and a single eligibility level based on income rather than on categories.
Utah has received a Section 1115 waiver to expand coverage with a primary care benefits package. The state’s decision to have new populations pay an enrollment fee sent an important message from the legislature in support of personal responsibility, officials said. The state would prefer to cover new populations through their employers, but recognizes that while 75% of the uninsured are working, most of their employers do not offer coverage at all or do not offer affordable coverage. Crowd-out thus is not a significant concern because the target population has very little affordable private coverage available.
Those at the NASHP meeting said that one immediate change the federal government could make that would simplify Medicaid eligibility rules would be to stop locking out single adults without children who earn less than the poverty guidelines. In addition, much of the Medicaid budget goes to cover the prescription drug costs of people with Medicare, and some states said that the federal government could help state budgets considerably by paying for more drug coverage for Medicare beneficiaries.
States asked to discuss their experiences with the Ticket to Work program reported varying degrees of success. In New Jersey, the program has attracted a different population than was originally expected. While intended to provide affordable health insurance for physically disabled people who were working but had no coverage, it has turned out to serve many mentally ill participants in low-paying jobs.
In Minnesota, 6,000 people have enrolled in Ticket to Work. Officials say that for about half of them it was a less expensive option than other Medicaid participation would have been. They said there has been frustration over the inability to define "work," and the need to qualify some people who do relatively little, often sporadic, work in their homes for their friends and neighbors. The Minnesota Ticket to Work program, they said, has to balance how much it helps higher income people with high health needs vs. lower income people with less intense chronic health problems. Minnesota’s experience was contrasted with that in Washington state where the program was not included in the governor’s budget this year and is likely to be cut.
One state official suggested that if Medicaid and Medicare paid the full costs of the care provided to their participants, private health insurance would be more affordable because there would be less cost-shifting and there would be fewer uninsured. Many of Medicaid’s complexities come from trying to separate the deserving poor from the undeserving poor, and it would be simpler to have a national health care program for anyone under, for example, 150% of the federal poverty level.
According to Ms. Kaye, NASHP’s work on that program is finished, although the organization is using lessons learned from it on a project on making Medicaid work for the 21st century. She says some congressional staffers have expressed interest in the concept of Medicaid buy-in, but it’s not clear if anyone in Congress will champion this approach to reducing the number of uninsured. As Medicaid reform continues to be discussed, some states are saying they would like to be able to run buy-in programs without going through the waiver process. "They’re saying that they’ve been carrying out the elements for quite a while; these are tried-and-true programs that are ready to go prime time."
[For more information, go to: www.nashp.org. Contact Ms. Kaye at (207) 874-6524.]