Indiana should consider dropping out of the Medicaid program, the chairman of the State Budget Committee suggested Wednesday after an actuary estimated that the federal health care overhaul could cost the state as much as $3.6 billion over the next decade.
Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the costs to Indiana will be so great that the state should consider the drastic step of creating another option to Medicaid.
"I think the federal government is putting us in a position where we're going to have to consider those kinds of alternatives," said Kenley, who heads the bipartisan budget panel.
"For example, we might want to drop out of the Medicaid program and see if we can design a ... health care system which is more effective than what we currently have, with the costs that we have, that will provide services to all of our Indiana residents," he said.
Medicaid, for which the federal government pays 65 percent of costs, currently enrolls more than 1 million Indiana residents in programs such as Hoosier Healthwise for children and pregnant woman, the Healthy Indiana Plan for uninsured, low-income adults and Care Select for people with disabilities.
Actuary Robert Damler of Milliman Inc., a consultant to the state Medicaid program, said the number of Indiana enrollees could expand to as many as 1.55 million, or about one of every four state residents, under the federal health care overhaul.
Damler said his estimate was a worst-case scenario that projects the Medicaid program will enroll all eligible Indiana residents — federal estimates project only about 80 percent — and that they will drop existing private insurance through employers and other means for the government coverage.
However, public health insurance proponent David Roos of Covering Kids & Families of Indiana said Damler's figures were flawed. He said enrollment in new state health programs trails off after a high initial level, noting that only about 45,000 people have enrolled in the Healthy Indiana Plan's medical savings accounts after the state projected as many 130,000.
Roos also said Milliman's projected $831.8 million cost to the state over 10 years in higher fees to doctors was off-base because the federal government will bear those costs for new enrollees in Medicaid.
However, Damler's estimates caught the attention of budget committee members and fueled a discussion in which lawmakers' philosophical differences rose to the surface as they got their first crack at debating the federal health care overhaul.
Sen. Brandt Hershman, R-Monticello, said even a portion of Milliman's estimated cost would be difficult for the state to bear, and he accused Congress of shifting costs to the states.
"How chilling is that? It might be only $2.1 billion — $2.1 billion that we don't have," Hershman said.
State Sen. John Broden, D-South Bend, said he did not view 100 percent enrollment in expanded Medicaid coverage as bad, especially since the federal government will bear 90 percent to 95 percent of the cost for new enrollees.
"I guess I'm not seeing the doomsday scenario," Broden said. "Yes, it's going to be more money, but a half a million people are going to get insurance who don't have it."
The more immediate cost to the state will be far less because the Medicaid expansion does not begin until 2014. Damler said Indiana will lose $20 million to $25 million in prescription drug rebates during the current budget cycle that ends in June 2011 because the federal government will claim them instead.
Lost rebates and state administrative costs will grow to $80 million to $110 million for the next two-year state budget cycle that begins July 1, 2011.
The liberal think tank Center for Budget and Policy Priorities issued a report recently saying Indiana and other states are exaggerating their costs for expanding Medicaid.
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