Tennessee proposes 'private option' Medicaid expansion

For Tennesseans earning 138 percent of the federal poverty level, the bottom end of the threshold for exchange subsidies, there would be two options under the Insure Tennessee policy.

Tennessee Gov. Bill Haslam this week proposed a "private option" Medicaid expansion policy for the state, the latest Republican state executive to back a managed care or market-based approach to bring in federal dollars. The model that uses privately-run health plans for Medicaid beneficiaries was pioneered by Arkansas, is in use in Iowa and is being explored by other states.

Haslam’s Medicaid waiver proposal, called Insure Tennessee, would give as many as 200,000 low-income residents access to Medicaid coverage under two routes — managed care plans with health reimbursement accounts or vouchers to buy an employer-sponsored plan and out-of-pocket medical expenses.

Previously, adult parents in the state who currently earn up to 105 percent of the federal poverty level are eligible for Medicaid. Childless adults in Tennessee and 16 other states are not eligible for Medicaid at any pay.

“We made the decision in Tennessee nearly two years ago not to expand traditional Medicaid,” Haslam said.  “This is an alternative approach that forges a different path and is a unique Tennessee solution.”

Haslam said his proposal has five aims: fiscal soundness, bringing individuals more choice, expanding “outcomes-based” payment models, incentives for beneficiaries to and preparing them for transition to commercial health coverage.

For Tennesseans earning 138 percent of the federal poverty level, the bottom end of the threshold for exchange subsidies, there would be two options under the Insure Tennessee policy.

Under a Healthy Incentive Plan, beneficiaries could choose to enroll in a Medicaid managed care plan with a type of incentive account modelled on HRAs to pay for cost-sharing. Under a Volunteer Plan, beneficiaries could access an insurance voucher valued at slightly less than the average per-enrollee cost for Medicaid, to pay for premiums at a health plan offered by employers and associated out-of-pocket costs.

Beneficiaries earning above 100 percent of the poverty level would be required to pay some premiums, with the option to earn contributions to accounts to cover those costs by performing healthy behaviors such as annual primary care visits, quitting smoking and taking health risk assessments.

Haslam is seeking a two-year waiver from the federal government for the program and also would need to work with the legislature to enact the program. If approved by the Centers for Medicare & Medicaid Services, Tennessee’s waiver program would be the first to include a voucher program for employer-sponsored insurance and would continue a trend of market-based policies such as nominal beneficiary cost-sharing.

“Our approach is responsible and reasonable, and I truly believe that it can be a catalyst to fundamentally changing healthcare in Tennessee,” Haslam said. “It is our hope that this plan opens the door in the future for innovation within our existing Medicaid program.”

The emergence of a Medicaid expansion proposal to cover the uninsured is welcome news to providers in Tennessee.

“For the past two years, THA’s number one priority has been securing Medicaid expansion in our state,” said Tennessee Hospital Association president Craig Becker.

“Insure Tennessee represents a meaningful alternative to traditional Medicaid expansion,” Becker said. “The working uninsured in our state currently find themselves in a coverage gap that results in limited access to healthcare. Insure Tennessee can close this gap and help our neighbors and loved ones find quality coverage and access to care. These individuals are hard-working Tennesseans who sometimes hold down multiple jobs and many who have even served our country in the armed forces.”

In total, 24 states have declined to expand Medicaid, although more Republican Governors have been expressing a willingness to consider leveraging the ACA’s expansion policy, 100 percent federal funding for new beneficiaries for three years and 90 percent coverage thereafter. Most recently, since the GOP midterm wave, two conservative Governors, Matt Mead of Wyoming and Gary Herbert of Utah, have proposed the idea of using alternative Medicaid expansion policies.

CMS has also proven willing to consider market-based ideas as long as they don’t impose undue burdens of beneficiaries. In 2013, Arkansas was the first state to get a waiver for a “private option” expansion, where new beneficiaries received subsidized coverage via insurance exchanges. Over the past year, Iowa and Michigan started waiver-based Medicaid expansion programs modelled on Arkansas, and Pennsylvania won approval for a similar plan, although a newly-elected Democratic Governor is expected to opt for traditional expansion.

Hospitals in states that have expanded Medicaid eligibility are already bringing in fewer self-pay and charity care patient cases. According to an analysis by the Colorado Hospital Association, hospitals in the states expanding Medicaid have seen program increasing on average from 15 percent of all revenue to almost 19 percent between 2013 and the first quarter of this year and the average proportion of self-pay patients declining on average by 25 percent.

Meanwhile, in states that haven’t expanded Medicaid, including most of the South, health systems and uninsured patients have been struggling with bad debt and charity care. A George Washington University study found that more than 1 million patients who use community health centers will remain uninsured because their states refused to expand, one third of them in Alabama, Florida, Georgia, Louisiana and Mississippi.

For uninsured patients who need treatment and health systems that want to treat them and get paid, there is one option that is controversial among insurers but nonetheless viable: paying for patients premiums via nonprofit foundations.