In a speech last week to the annual conference of Medicaid providers, Gov. Asa Hutchinson discussed his vision for the future of the private option, the state’s unique version of Medicaid expansion. Among the conservative twists that he would like to see added to the policy, Hutchinson said, was a punitive “lockout.” Certain beneficiaries would be subject to small premiums, and if they failed to pay, they wouldn’t just lose their health insurance — they would be barred from getting back on private option coverage for six months (even if they were able to start paying premiums or pay back what they owed for missed premiums).
People subject to pay premiums who failed to pay need to face “consequences,” Hutchinson said. “If someone is able-bodied, they’re not doing what they should do, they’re not participating and taking personal responsibility, then after a set length of time they ought to be locked out of their coverage,” the governor said, according to Arkansas News Bureau’s report.
The lockout — modeled on a similar provision that Indiana put in place when it went forward with its own Republicanized version of Medicaid expansion — was one of the recommendations from the Stephen Group, the consultant hired by the Health Reform Legislative Task Force. “Incentives are important, and the one thing that the consultant in Indiana told us is that ‘the stick’ is important as well,” said John Stephen, the group’s managing partner, in testimony before the task force last month. The governor’s speech on Tuesday marked the first time that he has commented specifically on the lockout policy, and his choice to highlight the provision likely signals to the task force that he would like to see it included in their slate of final recommendations, which are due at the end of this year.
The idea of “consequences” will likely have political appeal to Republican lawmakers who have focused on “personal responsibility” as a key pillar of the changes they would like to see made to the private option, and officials in Indiana argue that the lockout provision works as an important incentive pushing beneficiaries to make their required payments.
“I think it’s a needed provision because all along we want people to have some skin in the game,” said Rep. David Meeks, a Republican on the task force who previously voted against the private option. “We want people to be responsible for their own health insurance and hopefully by doing that it will incentivize them to make sure they’re making their payments on time.”
Advocates for beneficiaries, however, argue that the lockout threatens access to care and works against the policy goals of the Medicaid expansion, which aims to expand coverage. “The lockout is terrible health policy,” said Joan Alker, executive director of Georgetown University’s Center for Children and Families and an expert on Medicaid waivers. “There’s no value to it at all except to be punitive. It undermines continuity of care. It leads to an inability to measure quality. It worsens the problem that you get when people fall on and off coverage. It will just result in less preventive care, managing chronic conditions, and the things we know we need to do.”
A lockout provision also may prove unpopular with providers; by its very design, it could lead to more Arkansans without coverage, leading to the same questions about uncompensated care for the uninsured that helped prompt passing the private option in the first place.
Whether the feds will even give Arkansas permission to pursue a lockout remains an open question, but the governor appears keen to try. With the task force set to meet this week to formulate final recommendations, let’s take a look at the lockout provision. If Arkansas is successful in securing a waiver of Medicaid rules to to implement a lockout, it could emerge as the latest policy cookie sought by red states aiming to use negotiations over Medicaid expansion to move the program in a more conservative direction.
How premiums and the lockout would work
Both the governor and the Stephen Group report envision a carrot-and-stick scheme for private option beneficiaries. The state will ask beneficiaries to follow certain best wellness practices, such as visiting a primary care physician upon signing up, as well as work referral or job training programs if the beneficiary does not have a full-time job. If beneficiaries do all of that, they would be rewarded with extra benefits (dental and vision coverage). If they failed to do so, they would be hit with small premiums (the monthly charge would likely be 2 percent of income; for an individual right at the poverty line, that would be about $20 per month).
It’s worth noting that at least in the Stephen Group recommendations, the premiums would only be assessed on beneficiaries who failed to comply with the wellness and work referral requirements; as long as beneficiaries followed the rules, they would never have to pay premiums. It’s unclear at this point whether such premiums would only apply to people above the poverty line or whether the state might try assessing them on even poorer beneficiaries too. The lockout itself would almost certainly only apply above the poverty line, based upon what the feds allowed in Indiana.
Collecting premiums from very low-income people is notoriously difficult. The lockout is an effort to give the collection process some teeth. A few other states (Iowa, and now Montana in a newly approved waiver) have made premiums enforceable above the poverty line — that is, if beneficiaries who make more than 100 percent of the federal poverty level (that’s $11,770 for an individual or $24,250 for a family of four) fail to make premium payments, they can be disenrolled. But losing coverage isn’t permanent; they can still re-enroll (in the case of Montana, after paying what they owe to the state). The “lockout” provision, as practiced in Indiana and proposed by Hutchinson for Arkansas, goes further: If beneficiaries fall behind on their payments, they lose their health insurance and are disallowed from getting back into the program – “locked out” – for six months, even if they are now able to make premium payments or pay back what they owed (in Indiana, beneficiaries who fail to make payments are given 60 days to make them before being disenrolled and locked out). As punishment for missing premium payments, these beneficiaries likely have to go without health insurance for half a year.
The experience in Indiana, and other states
Indiana first pursued a lockout provision in its managed care Medicaid program via a Medicaid waiver in 2007, under the previous presidential administration. Under the previous program (known as HIP 1.0), a limited expansion of Medicaid which covered around 40,000 adults, 12 percent of beneficiaries were disenrolled and locked out of coverage for failure to make the required contribution to health savings accounts over the five-year demonstration period of the waiver (2008 to 2012). Payment rates did go up over time; in 2012, just 7 percent of beneficiaries were disenrolled and locked out. Over the five-year demonstration period, 12,490 people were locked out of coverage.
The waiver for HIP 1.0 was extended for two years until Indiana went forward with its own version of Medicaid expansion this year, known as HIP 2.0. The feds approved the plan, which kept the lockout in place, but limited it to six months (they originally asked for twelve) and limited the provision only to beneficiaries above the poverty line.
Indiana’s consultant, Seema Verma — who works closely with the administration in designing and administering health care policy and who helped implement the lockout provision in the state — told the Stephen Group that the current payment rate is 94 percent. According to the state’s quarterly report filed with the feds, less than 1,000 people have been disenrolled and locked out for failure to make payments over the first six months of the program. According to the Stephen Group’s testimony before the task force, Verma said that the lockout provision had a “low impact” on beneficiaries and was “very effective in terms of incentivizing making of payments.” However, it’s not clear at this point how much the payment rate has to do with the lockout, which did not immediately go into effect this year. Indiana also has a significant number of third-party payers such as employers, hospitals, foundations, and nonprofits that help people make their required contributions and may be impacting the payment rate (according to the quarterly report, these third-party payers have not been a significant factor for HIP 2.0, but some organizations such as churches may be helping to make contributions off the books).
Meanwhile, other states that have done lockouts in the past have seen larger number of beneficiaries locked out of coverage, with dramatic impacts on access to care. Facing a fiscal crisis in 2003, Oregon instituted premium and cost-sharing hikes for beneficiaries below the poverty line, and a six-month lockout for those who failed to pay. Within a year, enrollment was cut in half, by around 50,000 people, with two thirds of those people becoming uninsured. The most common reasons for people losing coverage were inability to pay premiums or cost-sharing, or owing back premiums. Disenrollment was most common among the poorest beneficiaries. Those locked out reported worse access to care and less use of primary care physicians, and were more likely to skip a needed prescription due to cost. They were four to five more times as likely to go to the emergency room for care.
Rhode Island instituted a lockout in 2002 for slightly higher-income children, parents, and pregnant women (making more than 150 percent of the federal poverty level) and within three months, 18 percent of families subject to premiums were locked out for nonpayment, with the majority becoming uninsured.
Past research indicates that assessing premiums can depress enrollment in Medicaid — both when beneficiaries leave the program because they can’t keep up with premiums and because beneficiaries may never sign up to begin with if they’re worried they can’t afford the premiums.
A lockout goes a step further because by definition it reduces the number of people covered for longer periods — enforcing a lockout guarantees that a subset of the expansion population will go back to being uninsured for six-month blocks. The punishment imposed on those beneficiaries could bring up all of the problems that the private option was meant to solve — not just in terms of access to care for beneficiaries, but also in terms of uncompensated care. (Prior to the private option, one in four Arkansans between the ages of 19 and 64 was uninsured; the private option helped cut the uninsured rate in half.)
“The goal of the ACA is to get people covered,” said Alker. “In part, that goal is important for all of us to make our health care system work better. Because as we have people who are uninsured, in periods of uninsurance, that results in cost shifting to others in the system. And it results in people’s chronic conditions getting worse. Those are all the things that we’re trying to avoid. That’s why I say as a matter of health policy, the lockout is a terrible policy. It has no redeeming features at all if you’re trying to reform the health care system. If you’re trying to punish people, okay, maybe it will work. But if you’re trying to improve your health care system…the plans do not like lockouts, the hospitals do not like lockouts, the consumers do not like lockouts, nobody coming at this from a health policy or even a health business perspective likes it or thinks it’s a good policy.”
Meeks acknowledged that a lockout could increase the number of uninsured Arkansans, but said that a strong penalty was necessary. “That’s always the tough part, but it’s part of the real world,” he said. “It’s an incentive for them to make every effort to pay that premium. If you have a penalty that’s pretty stiff then it’s going to be much more likely that they’re going to do everything they can to pay the premium – because [they] don’t know what’s going to happen in six months.” Added Meeks, “If I don’t pay my premium, my insurance gets cancelled and if something happens, I have to pay the consequences for it. It’s just trying to protect the taxpayer and trying to get people to take responsibility for their own lives and their own actions.”
Republican Rep. Charlie Collins, the co-chair of the task force, worried that in practice cost-shifting would result in taxpayers bearing the penalty. “I love the concept, it’s a great personal responsibility idea,” he said. The problem, Collins said, was that many providers, such as emergency rooms, are required by law to provide care even if the patient can’t afford to pay for it. “The lockout will punish you for not paying your premium, and say you can no longer use the private option,” he said. “So now what are you going to do? Well, when you have a headache you’ll go to the emergency room.” People locked out of coverage, Collins said, would end up getting care in more expensive ways, with taxpayers eventually footing the bill.
The potential for cost-shifting has some providers, and their allies in the legislature, concerned. “I’m not really a fan of the lockout,” said another Republican task force member, Rep. Joe Farrer. “The providers are left holding the bag because you’ve got to take care of the patient. The only people you’re actually going to punish will be the providers because you cannot refuse patient care.”
“Premiums are such a nightmare to collect five dollars, particularly for people who don’t have bank accounts and are not well educated about health care,” said Rep. Deborah Ferguson, a Democrat on the task force. “You’re risking these huge uncompensated care bills for hospitals, particularly for people that get locked out. I really worry about our hospitals with lockouts.”
Punishing the poor?
“These are people with very low means,” said Rep. Reginald Murdock, a Democrat and vice chair on the task force. “The very tenet of this program is that people have access. The lockout would be very disruptive for the people we’re trying to serve and protect in this initiative.”
While the premiums would be relatively low (and imposed only if beneficiaries failed to comply with requirements on wellness and job training), they might still prove to be difficult for low-income beneficiaries to keep up with. Someone making just $11,000 a year would have to pay $20 a month; a mother of three making $24,000 a year would have to pay $40 a month. Advocates for beneficiaries argue that even small monthly premiums can become burdensome or impossible for people living in poverty. The lockout, of course, adds the punitive edge: fall behind and lose health insurance for six months.
“These people have very, very little disposable income, so if you want to punish them and they might have to miss their rent and become homeless or not be able to feed their families, that’s your prerogative,” said Alker. “But to me it belies a misunderstanding of the very limited amounts of discretionary income that people in this income range have.”
Proponents of the lockout argue that beneficiaries need practice making payments so that they can eventually transition to private coverage. “The big picture is that it’s a behavior issue, learning how to use the system,” said Sen. Missy Irvin at a recent task force meeting. “We want people to climb the ladder or opportunity and transition out of this. They’re going to have to pay premiums. If [lockouts] were successful in teaching folks that you have to pay your premium, that if you don’t pay your premium there’s a consequence, that’s positive.”
One curious feature of the lockout, however, is that there really isn’t anything like it in private plans, which are supposed to be the model for the private option. The lockout applies even if the beneficiary wants to pay what’s owed. “The government is not acting like a business here,” said Alker. “A business here would be happy to take your business, they want your business. And the health industry wants your business. The government here is simply flexing its muscles and punishing you.”
Federal permission for a lockout in Arkansas won’t come easy
In Hutchinson’s speech last week, he implied that Arkansas should be able to get a waiver of Medicaid rules from the Center for Medicare and Medicaid Services (CMS) in order to implement a lockout provision because Indiana had gotten the okay to go forward with it. But Indiana was something of a special case because it already had a lockout in place in its Medicaid program prior to Obamacare and Medicaid expansion. Its lockout was essentially grandfathered in by the Obama administration. But when Pennsylvania asked for a similar provision, the feds said no.
“There is a question in our minds whether CMS will allow Arkansas to do a lockout at all,” Stephen testified to the task force last month. “They may just say that this was grandfathered and that’s why Indiana was a different example. It goes back to that issue of negotiating waivers. We believe it should be part of that discussion.” Stephen suggested that the state think carefully about how to tailor the request to get CMS to a yes.
“CMS has certainly rolled up their sleeves and tried to get to yes on all of these agreements but I don’t believe a lockout is somewhere they want to go,” said Alker. “Indiana was a little bit of a different case because they were operating from an existing program. But I would argue — and the administration may see it this way…I think the lockout is not compatible with Medicaid.”