How the HIV outbreak in Indiana under Mike Pence would have impacted Indiana under Per-Capita Caps

penceIn 2014 and 2015 Indiana suffered a preventable outbreak of HIV as a result of the opioid epidemic in the state. During a one year period 181 people were diagnosed with HIV in Scott County, Indiana alone and nearly 90 percent were the result of intravenous drug usage. A defining moment in Vice President’s Gubernatorial career, Pence is most known for implementing a needle exchange program despite his opposition to such policy. Yet, less well known is the role that Medicaid played and continues to play in the HIV outbreak and how the current per-capita cap and block grant proposals would have impacted Indiana if they had been in place at that time.

Medicaid plays a vital role in the treatment and testing of HIV patients, throughout the history of the program. An estimated 40 percent of HIV patients are covered by Medicaid, making it the largest insurer for HIV patients. Medicaid costs are increasing as patients are able to live longer and the cost of drugs and other care continues to increase. Overall, Medicaid is the second largest federal funder of HIV care and HIV patients account for 1 percent of those enrolled in Medicaid and account for approximately $9.4 billion of state and federal costs or a little less than 2% of total Medicaid costs.

The average HIV patient costs Medicaid about five times those of Medicaid beneficiaries overall averaging over $26,000 a year in 2011 for an HIV patient compared to approximately $6,000 a year in 2011 for other Medicaid beneficiaries. Part of this is because many of those enrolled in Medicaid are children who are relatively inexpensive to treat. As mentioned previously, the cost of drugs for HIV patients continues to increase, as was notable with the 5,000 percent (then lowered to a 2,500 percent and a mere 874 percent for Medicaid patients) increase in the price of the drug Daraprim by Martin Shkreli’s Turing pharmaceuticals.

Back of the envelope calculations indicate that Indiana could have been accountable for over $1.9 million in unexpected Medicaid costs in one year alone. This number is very variable based on how many of the newly diagnosed patients are low-income and eligible for Medicaid and how much the average cost for Medicaid HIV has increased since 2011, prior to the dramatic increase in drug costs. The number is expected to be much larger because of the relative wealth of Scott County, Indiana indicates a greater portion of those infected are likely to be Medicaid eligible and the cost for treatment has increased.

Regardless of the exact costs incurred, the spike in HIV infections in Indiana due to the opioid epidemic lead to increased costs to Medicaid.

How would this be different under the current Medicaid funding structure compared to the per-capita cap system? Under the current financing structure, the federal government would reimburse the state for over 65.5% of the cost of these new Medicaid costs, requiring the state to find the remaining portion. Had the per-capita cap program been implemented prior to this epidemic, Indiana would have had to bear the entire cost for this unexpected increase in funding. Because many states are not able to run deficits, the increase in costs would result the state either providing in fewer services or raising taxes.

How would Mike Pence have responded? His record as governor indicates that he would likely decide to reduce services. However, he learned from the response to the epidemic that small investments in public health programs (that often bear the brunt of these cuts) were able to effectively reduce the spread of disease. Additionally, he did recently promise that no one would “fall through the cracks” in Medicaid through the Republican’s health bill.

Mike Pence depended on federal funding when his state failed to prevent an epidemic. Per-capita caps would have been devastating for Indiana. Why would Pence push a policy that he would have likely opposed only a year ago?


Why are Conservatives Underplaying the Medicaid Reductions in the Affordable Care Act Repeal?

cutsA new argument has emerged in recent weeks in the debate over the repeal of the Affordable Care Act on the new policy to shift in the Medicaid payment system to “per-capita caps” or “block grants.” The argument is an attempt to portray the reductions in Medicaid enrollment and federal dollars allocated to the program as “hysteria” or dramatizations the reductions. The argument is recycled from the last eight years of the cuts to Medicare managed care plan incentive payments in the Obamacare debate, only with political parties switched.


The assertion from groups and pundits on the right who are in favor of the per-capita cap and block grant proposals is that the reductions in federal spending are not cuts to Medicaid.


From a purely logical perspective this makes little sense. The Congressional Budget Office has shown that the Medicaid program would see more than $800 billion in reduced funding and 14 million fewer eligible people would be enrolled than currently are in the program over the next ten years. The reality is that states will have to reduce the number of services they provide or reduce the types of people that can enroll as inflation and increased costs in medical services rise. This sounds like a cut. What the defenders of this claim- ranging from Karl Rove to Sally Pipes have insisted is that this is a cut to the growth rate, not cuts to the existing program.


But in a broader perspective this doesn’t follow a logical line from the conservative argument. The GOP has campaigned for decades on the idea that the social welfare state is bloated and that the oversized growth of the welfare state needs to be trimmed. The GOP should embrace the idea of calling per-capita caps and block grants cuts. From a policy perspective, the goal of the per-capita caps and block grants is to reduce the size and scope of the program.


Why have they begun to shy away from the argument that has been popular among their base and the broader public for decades? The most salient reason is that we have moved out of the Reagan era as the populace has moved to the left. The evidence for that lies with the popularity of Medicaid and the unpopularity of the Republican health care plan. The other reason proponents of the cuts have moved away from embracing their cuts is that Medicaid is efficient and trimming the program does not hold weight.


First, Medicaid is popular and the GOP American Health Care Act (AHCA) is not. In a recent poll by the Kaiser Family Foundation, Democrats and Republicans alike opposed cuts to the Medicaid expansion and half of Republicans oppose changing the existing Medicaid financing structure. Many other polls show that the majority of voters have favorable views of Medicaid, coming close to the level of support for Medicare. Telling is that a Quinnipiac poll found that Republicans oppose cuts to Medicaid. This is one possible reason that the latest messaging appears to be focused on reframing the cuts as minimal. Meanwhile, the AHCA has polled from 1721 percent by Quinnipiac and only 8 percent think that the Senate should pass these reforms without changes.


More importantly, the reality is that Medicaid is a pretty efficient program considering who it is providing services for and the types of care provided. Medicaid general spends less than other insurers to treat similar populations, largely because it often pays providers at a lower rate, although there is significant variation from provider to provider. The growth in Medicaid expenditure varies significantly from type of Medicaid coverage with the per-capita growth in long-term care much greater than the care for children, for example. In reality one of the largest causes of growth to Medicaid expenditures is the aging of the population with more people requiring long-term care services.