HOOSIERS GET SET TO DEBATE USING TOBACCO TAXES AND OTHER FUNDS TO EXPAND COVERAGE

When the Indiana General Assembly reconvenes on Jan. 8, 2007, it will take up an innovative plan that will, if passed by legislators and approved by the federal government, not only insure more Hoosiers, but reduce cigarette smoking and vaccinate more children. Proposed by Gov. Mitch Daniels last November, the plan has three major prongs:

• expand the state’s smoking cessation and reduction campaign by adding $24 million to the $11 million the state already dedicates to local anti-tobacco programs;
• provide $11 million to fully vaccinate more children by age two; and
• establish a health insurance program for 100,000 or more low-income Hoosiers.

“We’ve balanced the budget already through spending reductions and no tax increases. That will continue to be our approach,” Daniels said. “Any new proceeds should go to promote the health of Hoosiers and for no other purpose.”

“The governor’s plan is a small step, but one that needs to be taken,” said House Speaker B. Patrick Bauer. “We intend to do a lot more in the 2007 legislative session.” He and his Democratic colleagues plan to continue examining at least two more issues, he added: helping residents to purchase lower-cost prescription drugs from countries like Canada and allowing small businesses to pool their resources in order to limit costs.

Currently, about 27 percent of adults in Indiana smoke, a considerably higher rate than the national average of 20 percent. Indiana ranks 39th in the nation in immunizations for two-year-olds; and about 14.3 percent of Indiana’s population are uninsured, according to the U.S. Census Bureau.

A Blend of Coverage and Funds

The health insurance portion of the plan would be funded largely by an increase in the state’s cigarette tax—currently 55.5 cents per pack and the 36th lowest rate in the country—and a variety of federal funds. The governor has proposed raising the cigarette tax by 25 cents, which would help cover 120,000 Hoosiers. If the General Assembly chose to raise the tax by 50 cents, 200,000 people would be covered. “We’ve worked very hard to balance Indiana’s budget,” said a spokesman for the Indiana Department of Families and Family Services. “The governor was very adamant that we’re not going to jeopardize that.”

Coverage would be available to Hoosiers who earn less than 200 percent of the federal poverty level, don’t have access to employer-sponsored coverage and have been uninsured for at least six months (which should help ensure that people don’t drop coverage in order to get state help). Enrollment would be on a first-come, first-served basis.

A Pyramid of Coverage

Coverage would be divided into three tiers.

Each enrollee would receive free, state-funded preventive care of up to $500 annually, including physicals, smoking reduction, diabetes screening and certain other services.

Enrollees also would build up personal wellness responsibility accounts (or POWER accounts), health savings accounts that could be used to cover medical services such as physician visits, prescriptions and diagnostic exams. Participants would be required to contribute to the account on a sliding scale depending on family size and income, and the state would make up any difference to provide a $1,100 account for one adult and a $2,200 account for a family of two adults and two children.

Most contributions for POWER account would be collected through employer payroll deductions, although there would be alternative ways for participants to directly pay the state. No one would be required to contribute more than 5 percent of family gross income.

Each POWER account would be linked to a high-deductible, basic private policy that would be accessed if funds in the POWER account were exhausted. Policies would have to provide $300,000 worth of annual coverage.

Many Sources of Funds

The health insurance portion of the plan would receive funding from many sources, including the cigarette tax and contributions from enrollees. The governor also wants to redeploy unspent “disproportionate share” funds—federal dollars that are provided to hospitals that serve low-income populations. The thinking is that the state will have to spend less on uncompensated care because more people will be quitting smoking, being fully vaccinated, and getting the preventive and primary care that can keep them healthy.

The governor also would seek an 1115 waiver from the Centers for Medicare & Medicaid Services to help pay for services for non-traditional Medicaid populations: in this case, childless adults.

The governor’s plan was assembled with the help of a state planning grant provided in 2002 by the Health Resources and Services Administration (HRSA). The grant enabled the state to collect in-depth data and analyses, hold focus groups, and assess cost-drivers and the “safety net” in Indiana. In 2004, the state received a HRSA pilot planning project grant to further develop options for expanding coverage to low-income working individuals.