Consumer-driven health plans — health-insurance plans that cover catastrophic health expenses while letting individuals pay for more routine expenses out-of-pocket — are arguably the greatest innovation in health-care payment of recent years. They require lower premiums than conventional plans and help curb health-care inflation by incentivizing consumers to shop for health care on price, quality, and service. They are also a promising approach to providing basic health care for the poor. (For more information on what they do and why they work, peruse the work of Regina Herzlinger and John Goodman.)
The Patient Protection and Affordable Care Act is somewhat vague in how it treats consumer-driven plans. It reduces the amount that people can save in certain types of tax-free health savings accounts (HSAs). It restricts policyholders’ ability to buy over-the-counter medications using HSAs. It appears to leave the Secretary of Health and Human Services in charge of whether or not HSAs qualify for the state-based insurance exchanges that the new law creates.
But there are already some alarming signs that consumer-driven plans will be significantly curtailed by Obamacare. In a recent op-ed in the Wall Street Journal, Indiana governor Mitch Daniels wrote that his use of consumer-driven plans as a supplement to Medicaid would be barred by the new law:
[We must] plan for the termination of our Healthy Indiana Plan. This is the program that’s currently providing health insurance to 50,000 low-income Hoosiers. With its health savings account–style personal accounts, it has been enormously popular among its participants. I hope those folks will do all right when they are pitched into [traditional] Medicaid.
Governor Daniels, arguably the country’s most innovative health-care reformer, was granted a Medicaid waiver by the Bush administration to try a consumer-driven approach. Daniels’s plan rerouted existing Medicare disproportionate-share hospital payments into health care for the poor. While those under 122 percent of the Federal Poverty Level (currently $22,050 for a four-person family) remained on traditional Medicaid, everyone else, up to 200 percent of the FPL, was eligible for the Healthy Indiana Plan. The plan has been exceptionally popular, and harbors a sizable waiting list for entry.
By contrast, Obamacare bluntly forces states to expand Medicaid from 100 percent of the FPL to just 133 percent, but for a fully implemented cost exceeding $100 billion per year. Governor Daniels was able to bring health care to more people, at a far lower cost per capita, than Obamacare will — but he may no longer have that option.
If Governor Daniels’s interpretation of Obamacare is correct, the law will reduce health-care options for Indiana’s poor, will place long-term strain upon Indiana’s budget, and will force the state to drastically curtail its coverage of those above 133 percent of the FPL. What were those “top ten benefits” of Obamacare again?