Burdening Medicaid recipients with out-of-pocket costs won’t achieve intended goals

Republican leaders in the state House of Representatives are seeking to add out-of-pocket costs to Louisiana’s Medicaid program as a condition of agreeing to replace some revenue from expiring taxes. While it may seem sensible at first blush to require small copays or premiums from Medicaid recipients, an abundance of research shows that these payments don’t actually work. Still, Gov. John Bel Edwards included “a copayment requirement under the Medicaid program” in his list of what may be considered during the special legislative session that begins on Feb. 19.

Many states have enacted copays and premium requirements in their Medicaid programs, only to find that those requirements do not have the intended effects of reducing costs or curbing the use of unnecessary health services. Instead, the implementation of copays and premiums in Medicaid often have myriad unintended negative consequences, including higher costs to the state and reduced access to necessary health care services. That’s why, in previous sessions, the Louisiana Legislature has voted down nearly all of the Medicaid cost sharing proposals included in the latest GOP proposal.

In a letter to the governor, House Speaker Taylor Barras proposes the following Medicaid changes:

1. A co-payment requirement for non-emergency use of the emergency room
2. A co-payment requirement for non-preferred drugs
3. Premiums for Medicaid enrollees who earn above 100 percent of the federal poverty limit

Medicaid families are, by definition, living near or below the federal poverty line. The income limit for the vast majority of Medicaid enrollees is 138 percent of the federal poverty limit, which is just $34,600 per year for a four-person family. According to the Louisiana Association of United Ways’ ALICE report, a four-person family in Louisiana with two parents and two young children needs $46,240 per year to afford a basic survival budget. Families who earn at or below the Medicaid eligibility limit are already having great trouble making ends meet; adding out-of-pocket costs for health care will only make it harder to afford basic necessities.

Research findings and state experiences related to cost-sharing requirements include:

• Even relatively small out-of-pocket costs in the range of $1 to $5 are associated with reduced use of care, including necessary services.

1. • A comparison study of Medicaid patients in different states found that copayments for prescription drugs were associated with poorer outcomes for patients with hypertension and hypercholesterolemia.
   • Another study found that increased cost sharing is associated with reduced asthma treatment for children, forcing families to put off doctor’s visits or use less medicine than prescribed.

• Premiums serve as a barrier to obtaining and maintaining Medicaid coverage among low-income individuals.

1. • In Oregon, nearly half of adults disenrolled from Medicaid after the state began charging monthly premiums of up to $20. Many became uninsured and faced barriers to accessing care, unmet health needs, and increased financial burdens.
   • A recent study of the Healthy Indiana Plan waiver program for Medicaid expansion adults, which requires premiums for comprehensive coverage that range from $1-$100, found that 55 percent of eligible individuals either did not make their initial payment or missed a payment.

• State savings from copay and premium requirements in Medicaid are limited.

1. • A comparison study of states that require copays for non-emergency use of the emergency room ER) and states that did not found that copays did not result in a significant reduction in ER visits, nor did they increase outpatient provider visits or inpatient hospital care.
   • Legislation filed in the 2016 Louisiana legislative session that called for an $8 copay in Medicaid for non-emergency use of the ER would have reduced state payments to hospitals by an estimated $2 million, and left hospitals with the responsibility of collecting the copay from patients.
   • States with multiple cost sharing requirements must set up a system to track all  payments made by Medicaid households to ensure total cost sharing doesn’t exceed 5 percent of household income in a given year.
   • To collect monthly premiums in Medicaid, states must spend significant money sending notices, tracking payments, and administering non-payment penalties. In 2002, Virginia stopped charging premiums in its Children’s Health Insurance Program because the state was spending $1.39 in administrative costs for every dollar in premium revenue.
   • Similarly, a study by the state of Arizona found that it would cost the state about four times more to administer premiums in its Medicaid program than it could collect from these fees, even if the program charged the highest premiums possible.

Other states have identified successful strategies and programs that promote appropriate use of health care services among Medicaid enrollees without creating barriers to coverage and care. Such approaches include creating a 24-hour nurse hotline, establishing primary care sites with extended hours, and focusing on beneficiaries with multiple chronic conditions who use the most care. Louisiana policymakers should explore these approaches that have proven effective, rather than simply recycling the same old ideas.