By Jonathan Ingram, Nic Horton and Josh Archambault— Mr. Ingram is Research Director, Mr. Horton a Policy Impact Specialist, and Mr. Archambault a Senior Fellow at the Foundation for Government Accountability
Arkansas’s Obamacare Medicaid expansion has been a costly misadventure. The expansion has been so misguided in fact, that lawmakers voted earlier this year to end it, effective December 31, 2016.
That hasn’t stopped state bureaucrats from scurrying to institute a new component of expansion that makes the program even worse. Under this plan, some enrollees are asked to contribute nominal amounts to new “Health Independence Accounts,” or HIAs, which were supposed to mirror health savings accounts.
But these new HIAs are nothing like real health savings accounts and were destined to fail from the beginning. Now that the program is up and running, the evidence is mounting: so-called “independence” accounts are actually reducing enrollees’ “skin in the game,” and costing even more money for taxpayers.
Health Independence Accounts Are Nothing Like Health Savings Accounts
Under this new Obamacare Medicaid expansion tweak, enrollees above the federal poverty line are “required” to make monthly contributions to HIAs. But the truth is that this “requirement” is more like a mere suggestion. If enrollees refuse to contribute to their accounts, they aren’t removed from the program.
These suggested contributions start at just $10 per month. But unlike real health savings accounts, Private Option enrollees will not use funds in their HIAs to pay for their own medical care. Instead, the money will simply sit in enrollees’ accounts until they leave the program. At that point, they can take the money with them and use it toward other health care costs.
In return, the state waives all other cost-sharing requirements in exchange for this nominal contribution. If an enrollee misses a contribution, he or she could be responsible for nominal copayments that month.
Rather than encouraging enrollees to avoid unnecessary treatment and shop for value, as health savings accounts would, these HIAs are designed to undermine those very values. Enrollees have absolutely no financial incentive to use care wisely, which will inevitably lead to increased overutilization and unnecessary treatment.
81 Percent Of Private Option Enrollees Have No Cost Sharing At All
After learning that this new tweak would add massive costs to a program that was consistently exceeding its budget cap the first year, lawmakers actually eliminated HIAs for the majority of Private Option enrollees earlier this year, before they ever went into effect. The original plan called for all individuals above 50 percent FPL to contribute to HIAs.
But this means that all individuals below the federal poverty line –more than 200,000 Private Option enrollees and growing – don’t pay a dime for their coverage or care. (Despite earlier promises, the state never incorporated copayments for these enrollees.)
But these accounts remained intact for those above the poverty line and the state began implementing the program earlier this year. So far, the results have been nothing short of disastrous.
Health Independence Accounts Are Costing Taxpayers Millions
According to newly-released data from the state’s Medicaid consultant, just 43,000 of the 250,000 Private Option enrollees have received HIA cards. Just 10,000 of those enrollees even bothered to activate their cards.
But not all those with activated cards have made contributions.
So far, just 2,000 to 3,000 enrollees are making monthly contributions. In total, less than one percent of Private Option enrollees are actually contributing to these new accounts.
Despite low participation, taxpayers are set to pay out $8.1 million just to administer the program this year. And it gets worse. When the state unveiled a rough outline of the HIA program last summer, we cautioned that it would create ways for enrollees to reduce skin-in-the-game and leave taxpayers holding the bag. Now that the program has been implemented, that warning has evolved from theory into reality.
Despite Promises, Health Independence Accounts Reduced “Skin In The Game”
The Private Option’s HIAs were originally sold to the public as a mechanism to increase cost sharing and provide enrollees with more “skin in the game.” But thus far, the program has done the exact opposite.
So far this year, enrollees have contributed a total of $147,925 to these accounts. But remember: in exchange for making contributions, the state steps in and pays enrollees’ copayments, coinsurance, and other cost sharing amounts. So far, taxpayers have chipped in $170,932 to cover copayments for enrollees who have chosen to participate in the HIA program.
In other words, the HIA program has reduced cost sharing for these enrollees by more than 13 percent. Enrollees would have had more “skin in the game” if the state had never bothered to create the HIA program at all.
The program simply enables more able-bodied adults to reduce the amount of financial responsibility they have for their own health care and shift more costs onto taxpayers.
No Amount Of Window Dressing Can Justify Obamacare Medicaid Expansion
Arkansas isn’t the only state looking at implementing spurious health savings accounts. Indiana, for example, based its own Obamacare expansion on creating so-called “POWER accounts” that, despite Gov. Pence’s promises, look nothing like real health savings accounts.
Hospital lobbyists in other states are urging lawmakers to expand Medicaid, pretending that simply chanting the words “health savings accounts” can make Obamacare Medicaid expansion conservative. But as Arkansas has demonstrated, once these programs are actually implemented, they often do the exact opposite of what their designers promised.