HHS approves Indiana Medicaid waiver that requires beneficiaries to work

HHS has approved Indiana's updated Medicaid waiver, which applies a premium surcharge for beneficiaries who use tobacco and fail to participate in tobacco cessation activities. (Sarah Stierch/CC BY 4.0)

The federal government on Friday approved an updated version of Indiana’s Medicaid demonstration waiver, making it the second state where some beneficiaries will be required to work in order to receive benefits.

The state’s previous Section 1115 waiver, which was set to expire this month, already broke new ground by charging some adults a monthly premium and locking out some who fail to pay. Vice President Mike Pence and Centers for Medicare & Medicaid Administrator Seema Verma designed the Healthy Indiana Plan back when Pence was the Indiana governor and Verma a healthcare consultant.

RELATED: Indiana Medicaid drops 25K from coverage for failing to pay premiums

Indiana’s renewed waiver goes even further by not only including work requirements for certain enrollees, but also applying a premium surcharge for beneficiaries who use tobacco and fail to participate in tobacco cessation activities.

By charging beneficiaries a surcharge related to a specific behavior like tobacco use, the state will test whether incentivizing them to change behavior and engage in their own healthcare will achieve better health outcomes, according to the Department of Health and Human Services’ waiver approval letter (PDF). 

The updated waiver also includes a new funding authority to expand treatment options for Medicaid enrollees struggling with substance abuse, including opioid addiction. In addition, the state will now charge premiums based on income rather than a flat rate of 2% of household income.

To newly sworn-in HHS Secretary Alex Azar, the newly renewed waiver “serves as a testament to Indiana’s ongoing commitment to improving the lives of its Medicaid beneficiaries,” according to an announcement from the agency.

“We look forward to collaborating with Indiana on this next evolution of HIP, which serves as another example of the Trump administration’s support of state-led efforts and innovative reforms to make our HHS programs really work for Americans,” he added.

Indiana’s renewed demonstration will last through the end of 2020. With HHS’ approval of the waiver, there are now two states that can compel certain beneficiaries to work or complete other community engagement activities like job training or volunteering. In January, Kentucky became the first state to have a waiver approved that includes work requirements.

In its approval letter, HHS said Indiana’s waiver aligns with guidance issued by federal officials, which outlines how such waivers should be structured and who should be exempt from work requirements.

“The state's approach is designed to prepare beneficiaries for the personal responsibility required to maintain coverage and continuity of care they will experience when they seek commercial insurance coverage,” HHS said of Indiana’s waiver.

Yet Kentucky’s waiver has already been challenged by a proposed class-action lawsuit filed by Medicaid beneficiaries who claim HHS overstepped its authority by approving the demonstration.