Premiums in Medicaid: The (not so) Recent Trend

By Emma Sandoe

Requiring Medicaid beneficiaries to pay premiums and other cost-sharing for medical services is not new to the Medicaid expansion debate. Premiums were introduced as part of the Tax Equity and Fiscal Responsibility Act of 1982. Previously, states were prohibited from imposing enrollment fees, premiums, or deductibles for any categorically eligible individual in the Medicaid program. This law allowed states to implement minimal cost-sharing for waiver demonstrations, but prohibited states from denying medical care due to an inability to pay.

Since this law was passed, the Centers for Medicare & Medicaid Services (CMS) has clarified that certain populations including pregnant women and children were exempt from most cost-sharing. Additionally, certain services are exempt from copayments and coinsurance entirely. The maximum amount that can be charged varies based on wage and type of service and where the beneficiary seeks treatment.

Prior to Indiana’s 1115, approved in 2014, CMS did not allow state waivers to charge premiums to individuals making under 50% of the federal poverty line (FPL). Indiana’s expansion plan is unlike any other state’s waiver plans. It requires individuals to pay a “monthly contribution” of $1 a month or 2% of a family’s income which ever is greater. When a beneficiary that has been paying these monthly contributions uses medical services, they are not required to pay co-payments. Previously, Indiana lowered the income eligibility for premiums during its 2013 waiver when it required premiums for individuals making between 50-100% of FPL. Arkansas and Iowa saw that precedent set by Indiana and lowered their cost sharing levels from 100% of FPL to 50%.

Last week, CMS approved Montana’s expansion 1115 waiver application. Like Arkansas and Iowa, their plan calls for premiums for those making over 50% of poverty. However, unlike Indiana and their initial plan, the premiums are not required for people making under 50% FPL.

This is an important step for the financial Medicaid beneficiaries. As the Oregon Health Insurance Experiment found, one of the primary purposes of Medicaid coverage is to protect low-income individuals from financial ruin due to medical expenses. Asking low-income individuals to pay for their medical care does not reduce unnecessary medical care. In fact, we’ve known for decades that low-income individuals instead forego necessary medical care when faced with cost-sharing. States should not follow the lead of Indiana and require individuals making less than 50% of poverty, equivalent to $5,900 annually, to pay premiums and cost-sharing for the cost of their medical care. This does not significantly add to state revenue and may lead to low-income individuals having worse health outcomes, meaning the state will have to pay more in medical care for this person later. When these waivers require CMS renewal, CMS should require evidence from the states that these premiums are necessary. There should be a high bar for renewing this cost-sharing for low-income beneficiaries.

Also last week, Kentucky elected a new governor, Matt Bevin. While it is unclear what he plans to do with the state’s Medicaid expansion, he has expressed interest in following Indiana’s example. Instead he should look to Iowa, Montana, Michigan and Arkansas’s experience and not ask people making $0 a year to pay premiums.

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