Rhonda Cree has diabetes, significant vision loss, and high blood pressure, and relies on Medicaid to cover her prescriptions and other healthcare costs. But Cree, 61 years old, lives in the town of Logansport in north-central Indiana. Unlike most of the other 65 million Americans on Medicaid, Cree lives in a state that requires her to pay monthly premiums for her coverage.
Last November, Cree was unable to pay her full monthly premium. The state stopped her coverage and barred her from reapplying for six months. During that time, Cree could not afford to pay for prescribed injections, and suffered more vision loss as a result.
Mike Pence’s plan is working exactly as he hoped.
Before Pence ascended to the national stage as Vice President, he recruited his longtime ally Seema Verma to lead the Center for Medicare and Medicaid Services (CMS), and together they crafted a unique Indiana approach to Medicaid. Their goal was to reshape the 54-year-old program into something far smaller and more punitive. The Healthy Indiana Plan, they promised, would demand “skin in the game” from enrolees like Cree.
Medicaid works as a federal-state partnership, with the federal government paying most of the cost and the states agreeing to follow guidelines set at the national level. All US states have agreed to the terms, and Medicaid makes up almost one-fifth of the country’s personal healthcare spending.
The platform for Pence and Verma’s ambitious remodelling of Medicaid was provided by the 2010 Affordable Care Act (ACA) invitation to states to significantly expand their Medicaid coverage. Under the ACA, all adults in households whose income is less than 133% of the federal poverty level, a little under $17,000/year for an individual, would be eligible for Medicaid. But in 2012, the US Supreme Court in the case of National Federation of Independent Business v. Sebelius ruled that Congress did not have the authority to demand that states expand Medicaid, although states could do so if they wished. For Republican state officials like then-Indiana governor Pence, the ruling created a dilemma.
On one hand, Pence was a vocal opponent of ACA and Medicaid. “We are going to use every means at our disposal to oppose this (ACA) government takeover of health care,” he said. Of Medicaid, he pronounced, “The sad truth is that traditional Medicaid is not just broke, it is broken.” But the ACA included a tantalising offer for Indiana and other states: if Medicaid coverage expanded as the new law called for, the feds would pay the full cost of the initial expansion, and 90% of the cost after that. Pence’s constituents, most notably the well-connected leaders of Indiana hospital systems that would benefit from more of their patients being covered by Medicaid, pushed him to accept the deal.
Caught between his ideology and political pressure, Pence turned for help to Verma, a former Indiana hospital administrator who had launched her own consulting firm. Verma already had a reputation for taking a conservative approach to public healthcare systems, earning contracts from multiple state agencies and private companies. She earned praise for avoiding the “fatal mistake of making everything free,” as Pence’s predecessor Mitch Daniels put it.
At Pence’s request, Verma took the lead in crafting a version of Medicaid expansion that would look less like a government program than a high-deductible insurance plan offered by the for-profit insurance industry. The Healthy Indiana Plan, Pence promised, would be a “hand-up, not a hand-out.” It would demand healthy behaviors and personal responsibility from low-income Hoosiers, or they would face the consequences.
Premiums, lockouts, and co-payments
Under the Medicaid Act, the US Secretary of Health and Human Services can waive some Medicaid requirements for states that wish to experiment with new approaches, as long as those approaches promote the objectives of the overall program. In 2014, Pence and Verma asked for a federal waiver to implement their reimagined version of Medicaid.
Indiana wanted to accept the ACA Medicaid expansion offer of near-total federal funding, they said, but only if the state could require enrolees to pay monthly premiums to private insurance companies that contract with the state, and terminate non-compliant enrolees like Cree, and lock them out of coverage for failure to pay. Pence and Verma also wanted to demand co-payments, even for emergency services and even from the lowest-income persons on Medicaid.
Past Medicaid waivers had been granted to states seeking to make small tweaks to the program, but the Indiana terms were far more sweeping. The Pence-Verma plan ran counter to decades of Medicaid practices, and to the research consensus that cost sharing for healthcare was often quite harmful, especially to persons with chronic illnesses. Imposing user fees on the poor has proven to be “a prescription for death,” says physician and Harvard Medical School instructor Adam Gaffney.
Now it was the Obama administration that faced a dilemma. After the Sebelius ruling, many other Republican-led states were refusing to expand Medicaid. Seventeen states still have not done so. Even the Healthy Indiana Plan’s restricted version would expand coverage to hundreds of thousands of people in the state. Indiana healthcare advocates did not like the punitive Healthy Indiana Plan approach, but told federal administrators that the Pence-Verma half-loaf was better than none. The Obama administration approved the waiver.
The Pence-Verma version of Medicaid fulfilled each side’s predictions. The Healthy Indiana Plan has covered as many as 400,000 persons, most of whom otherwise would not have healthcare coverage at all. But, in the first two years of the program, over 70,000 people who failed to make premium payments were either kicked off coverage or never able to start coverage at all.
Killing ACA with a thousand cuts
Pence and Verma claimed victory, highlighting their conservative approach to healthcare as their careers expanded beyond Indiana. In the Trump administration, they serve a boss who shares their hostility toward ACA. Trump has called it “a big lie,” and signed an Executive Order on his first day in office calling on all federal agencies to do everything in their power to dismantle it.
Trump’s Congressional push to repeal the ACA failed in 2017. But, outside the bright lights and resistance the administration had found in Congress, Verma began to deploy CMS’s substantial clout with states to push forward an anti-ACA agenda. If the Trump administration could not repeal the ACA in one dramatic legislative act, they would take it down with a thousand cuts.
On her first day in office as CMS administrator, Verma sent a letter to all state governors announcing her opposition to Medicaid expansion under ACA and urged them to adopt Indiana-style premiums and co-payments for emergency treatment. In January 2018, CMS sent another letter encouraging state Medicaid directors to impose work requirements on their enrolees.
Official Trump administration pronouncements on work requirements highlight an intent to promote the “human dignity” that comes with work. Verma herself has labeled opposition to work requirements as “a tragic example of the soft bigotry of low expectations espoused by the prior (Obama) administration.” But the numbers associated with work requirements show they would play a significant role in undercutting ACA. The first Medicaid work requirement that CMS approved was in Kentucky, where administrators estimated the plan would remove 100,000 people from the rolls. Sara Rosenbaum, former chair of the Medicaid and CHIP Payment and Access Commission, said the aim of the state’s proposal was clear: “It’s purpose is to thin the ranks.”
A federal judge enjoined Kentucky’s plans before they could take effect. But Arkansas’ CMS-approved work requirement caused 18,000 people to be kicked off Medicaid within the first nine months of its rollout, before it too was halted by court order. In March this year, President Trump’s 2020 budget proposed applying Medicaid work requirements nationally, calculating they would reduce Medicaid costs by $130 billion over a decade.
When work requirements undermine work
Work requirements may effectively thin the Medicaid ranks and save billions of dollars, but they usually do a poor job of actually encouraging work. Many current Medicaid enrolees already have jobs. But research by the Kaiser Family Foundation shows that nearly half of those who work part-time cannot work more hours due to family or other obligations, or they are unable to find more work where available jobs are tied to inconsistent hours and low pay. CMS has blocked states from using Medicaid funds to create programs to provide work supports like training, childcare, and transportation.
Others on Medicaid are living with significant disabilities. In theory, they should qualify for exemptions from work requirements. But more than half of those disabled persons have not yet received official confirmation from the Social Security Administration of their disability status. As a result, they are likely to struggle to obtain that exemption. So too with the millions of others on Medicaid who are caregivers for elderly or family members with disabilities.
For those on Medicaid who can work, the requirements often create a barrier to the purported goal of encouraging employment. People with healthcare are more likely to get a job and keep it, because they can avoid the trap of not being able to afford treatment for conditions that mushroom into crises that require extensive care and time off work. In striking down Arkansas’ work requirements, US District Court Judge James Boasberg began his ruling by telling the story of Adrian McGonigal, whose job at an Arkansas food service company did not provide health insurance. For four years, McGonigal was able to get his prescriptions filled and go to the doctor, thanks to Arkansas’ Medicaid program. But McGonigal struggled with the state’s reporting mandates. One day, he went to refill his prescriptions and was presented with a bill for $800. The state had cut him off. McGonigal could not afford to pay for the medicine, and he fell ill and had to miss several days of work. He lost his job.
Push-back from Indiana
Pence’s former Lieutenant Governor Eric Holcomb, who succeeded Pence as governor, wasted no time in taking up the CMS invitation to impose Medicaid work requirements. Holcomb proposed, and CMS quickly approved, sweeping new work requirement rules layered on top of the state’s premium and other requirements. (Verma recused herself from reviewing Indiana’s proposal.) Indiana Medicaid enrolees deemed able to work are now required to be employed or engage in work-related activity each week, and to report their hours. If they do not meet these requirements their health coverage will be suspended beginning January 2020.
An actuarial firm working for the state estimated that the new work requirement will cause more than 24,000 persons to lose their Medicaid coverage each year. (Another CMS-approved Indiana penalty, a lockout of Medicaid enrolees who do not complete a redetermination process on time, could remove as many as 18,000 more people each year. When CMS issued its approval of Indiana’s request to impose work requirements, it did not mention the state’s projection that 24,000 people would lose their coverage. The state’s current director of Family and Social Services Administration, the agency tasked with overseeing the work requirement, also avoids mentioning the projected losses, instead telling media and lawmakers that the goal is for no one to lose coverage.
A coalition of Indiana advocates, including state lawmakers, urban faith organizations, and a rural community action group, are pushing back. In a series of protests and petitions, they are pressing Holcomb to withdraw his work requirements plan. And in early October, in a new lawsuit filed in the US District Court in Washington, DC, Cree and other Indiana residents attacked the Trump-Pence-Verma plan at its Indiana roots. Represented by the National Health Law Program and Indiana Legal Services, they are asking that the Healthy Indiana Plan’s premiums, lockouts, and work requirements be struck down for violating the constitution and federal statutes.
It is the fourth lawsuit challenging states’ CMS-approved work requirements on Medicaid enrolees, and the other three suits have all succeeded in stopping the waivers in Kentucky, Arkansas, and New Hampshire. But this is the first to strike a blow directly at the Pence-Verma brainchild that serves as the Trump template for undermining the ACA.
The lawsuit argues that the Indiana plan, and the national Trump agenda it helped create, is a blatant effort to undermine the Medicaid Act, duly passed by Congress and signed into law. This would be a violation of Article II, Section 3 of the US Constitution, which requires the executive branch to “take Care that the Laws be faithfully executed.”
The lawsuit’s initiating Complaint is 55 pages long, but its first paragraph tells the tale: “The Executive Branch has instead effectively rewritten the statute, ignoring Congressional restrictions, overturning a half-century of administrative practice, and threatening irreparable harm to the health and welfare of the poorest and most vulnerable in our country.”
Those poor and vulnerable Americans are now striking back, and they are doing so from Mike Pence’s home state.
Fran Quigley is a clinical professor at Indiana University McKinney School of Law, where he directs the Health and Human Rights Clinic, and is editor of the weekly publication Faith in Healthcare.