Lawmakers advanced various bills designed to reduce health care costs and reform Medicaid reimbursement rates. (Getty Images).

By Whitney Downard
Indiana Capital Chronicle

A slew of health care bills moving through the legislature target high prices for Hoosiers by encouraging competition and restructuring how the state pays for services under Medicaid.

But critics say the bills don’t go far enough and more is needed to reform the system – especially for government insurance reimbursement rates.

Bills In The House

In the House Chamber, lawmakers sent two health care bills – both caucus priorities for Republicans – for consideration in the Senate.

The first bill attempts to navigate the complexity of health insurance while the second penalizes hospitals for high prices.

Under House Bill 1003, authored by Rep. Craig Snow, businesses with less than 50 employees would receive a $400 tax credit per employee if owners adopt a health reimbursement arrangement (HRA).

Rep. Craig Snow, R-Warsaw (From the Indiana House Republicans).

The second of two health care bills advanced by the House, House Bill 1004, also includes a tax credit for (HRAs) as well as a credit to physician-owned health care facilities.

Snow, R-Warsaw, said that half a million small businesses in the state had 20 or fewer employees and thousands of employees couldn’t offer their employees insurance.

“The shift to HRAs is a decrease in costs for both parties,” Snow said about employers and employees.

HRAs are funded by employers, under which employees are reimbursed tax-free for qualified medical expenses up to a certain amount each year. The increasingly popular accounts are used in tandem with traditional health insurance, often in a high deductible plan, and operate similar to health savings accounts.

On the other hand, Rep. Donna Schaibley’s House Bill 1004 aims to create more competition among both insurance companies and health care providers while also penalizing some hospitals whose rates exceed the national average.

Rep. Matt Pierce, D-Bloomington, voiced his support for the bill, saying that Indiana University Health, based in his district, had done much to discourage competition in his area while charging more for services.

“But what concerns me more – our quality of care is actually declining at the same time we’re paying more,” Pierce said. “I think this bill is a start but we need a comprehensive approach.”

But Pierce’s colleagues were split in their support for the two health care bills, saying the proposals didn’t go far enough.

“I didn’t see anything… that would meet the test for real progress,” Rep. Ed DeLaney, D-Indianapolis, said. DeLaney, who voted against both bills, said national – not state – officials needed to take action.

“I think we tend to mislead people to think we’re doing something substantive when we can’t.”

DeLaney and nine other Democrats voted against both proposals. House Minority Leader Phil GiaQuinta, D-Fort Wayne, also voted against Schaibley’s bill.

Senate Bill Draws Attention To Medicaid Reimbursement Rates

Several other health care bills aimed at reducing costs have garnered much discussion in the Senate, specifically a wide-ranging bill from Sen. Liz Brown, R-Fort Wayne.

Brown’s bill creates a pilot program aimed at reducing barriers related to prior authorizations, provisional credentialing for health care providers and a license for associate physicians.

Sen. Jeff Raatz, R-Richmond, praised the bill but emphasized the need to specifically tackle the state’s Medicaid reimbursement rates. He highlighted a specialized physical therapist working with children in his hometown whose efforts made a difference in his patient’s lives but could barely operate under the current payment structure.

“This organization can’t live financially under the matrix of which we live under today,” Raatz said. “We have to do a better job in our reimbursement rates in Medicaid.”

Action on Medicaid reimbursement rates, which are set by the state, is already underway in the state budget – partially due to federal pressure on managed care programs.

The federal Affordable Care Act (ACA) tried to incentivize states to adopt an expanded version of Medicaid that would provide health care coverage for those making too much for traditional government insurance programs.

But Indiana had a pre-existing program for this population: the Healthy Indiana Plan (HIP). The state opted to combine the new federal match with the program to create HIP 2.0, which now covers an estimated 740,000 Hoosiers, nearly a third of the 2 million Hoosiers on Medicaid.

Across the government insurance programs, Medicare has the highest payments and other options are measured as a percentage of their payments compared to Medicare.

In Indiana, HIP reimburses at 100% of the Medicare rate, while traditional Medicaid is lower, around 75% of the Medicare rate. This benefits the state because Indiana pays a larger percentage of traditional Medicaid, 65%, than under HIP, where it pays 10% of the costs.

Reimbursement rates across Indiana insurance programs. (From a HIP Rate Equalization presentation from the Family and Social Services Administration).

In November of 2020, one month after the federal government approved HIP for a 10-year renewal, the Centers for Medicaid and Medicare Services ruled that different rates among Medicaid programs was unfair. A year later, it declared Indiana to be out of compliance and clawed back $500 million in payments.

Indiana appealed, promising to restructure its reimbursement rates by January 2024. The federal government accepted, partly due to the COVID-19 pandemic.

“(A) disruptive loss of associated federal funds for all Medicaid managed care programs given a failure to comply… would substantially and detrimentally impair the state’s ability to provide critically needed care to Medicaid beneficiaries during the (Public Health Emergency),” CMS wrote to State Medicaid Director Allison Taylor last July.

The proposed compromise would lower HIP’s reimbursement and increase traditional Medicaid to 80-83% of payments under Medicare. The House budget, in its current form, goes beyond that for specialized services, such as dentists and home health services, investing additional dollars to increase that reimbursement rate to 90%.

Additionally, the budget stipulates that the state must study its Medicaid reimbursement rates. At the same time, the state is moving one of its last fee-for-service populations into a managed care program – elderly and disabled Hoosiers receiving long-term supports and services at home or in nursing homes.

The fiscal analysis attached to the budget doesn’t note any specific costs related to equalizing reimbursement rates.