Printer Friendly

The Health Insurance Flexibility and Accountability (HIFA) Demonstration Program: A new initiative to cover the uninsured. (Health Policy Update).


Seeking to keep his promise to give states more flexibility while expanding health insurance coverage to low-income people, President George W. Bush released a proposal to reform Medicaid and The Children's Health Insurance Program. This initiative, the Health Insurance Flexibility and Accountability Act (HIFA), represents a significant change in Medicaid policy. Whether states will find this proposal a useful tool to expand coverage remains to be seen.

This summer the Bush administration introduced broad new policy changes in Medicaid and the State Children's Health Insurance Program (SCHIP).

The new initiative, the Health Insurance Flexibility and Accountability (HIFA) Demonstration program, is designed to give states more options to expand coverage to low-income individuals and families. It also streamlines the approval process that states must go through to receive federal waivers from the Medicaid and SCHIP rules.

Historically, states asked for these federal waivers to design state-specific programs to expand coverage for the uninsured. By seeking exceptions to these rules, states attempted to form partnerships with the private sector, reduce costs, expand coverage or offer services that are different from those in a traditional insurance package.

Reducing the paperwork

Plagued by cumbersome paperwork and delays, the federal waiver process frustrated states for years.

Under this new system, a new state application process uses a standardized template to gather data. And guidelines are clearer.

If a state uses the template and completes the entire application, they are promised a more prompt review and decision. This is important because states historically waited months, sometimes years, before decisions were made on their federal waiver requests.

It's hoped that the template will reduce the number of questions federal policy makers must ask in order to clarify the state's intent prior to a wavier decision.

Expanding coverage

States are encouraged to expand their programs through partnerships with private insurance companies.

HIFA is presented as a cost-saving initiative that gives states the flexibility to use the Medicaid and SCHIP programs as vehicles to increase health insurance coverage for low-income individuals (below 200 percent federal poverty level) traditionally excluded from Medicaid and SCHIP coverage, or who now only receive limited coverage.

States can expand coverage to populations above 200 percent of the FPL, but they have to demonstrate that all populations below 200 percent are covered.

The initiative divides the population into three groups: (1)

1. Mandatory groups include recipients that states must now cover under Medicaid. These groups include anyone covered under the state welfare plan in 1966, as well as those who are covered under the new welfare reform act and receiving transitional medical assistance. Children under the age of six and pregnant women up to 133 percent of the FPL are included, along with children between ages six and sixteen to 100 percent of the FPL and some 18 year olds. Disabled and elderly Social Security beneficiaries are also covered. The proposal requires that these benefits remain intact.

2. Optional groups are those eligible that states may wish to cover under existing law who have incomes above the mandatory population levels. The proposal allows states to adjust these optional benefits within certain guidelines to expand coverage to uninsured individuals. There are several benefits described as optional for states to include as a benefit. Some examples are home health for non-nursing home eligible individuals, prescription drugs, personal care and dental care. These optional benefits are not truly optional for children, however, since the early periodic screening, diagnostic and treatment (EPSDT) guidelines require children to receive all of the appropriate follow-up care identified after evaluation.

3. Expansion groups include those individuals who can only be covered by Medicaid or SCHIP through the federal 1115 waiver authority. They can include non-disabled adults who do not have any children and others not traditionally eligible for Medicaid.

During his weekly radio address in August, the president cited the recent initiative in New York that provided health insurance coverage to over 610,000 low-income residents while using existing funds. (2)

The New York program is similar to the HIFA initiative because it uses savings from a more flexible package to help finance further coverage expansions.

The devil's in the details

While the HIFA guidelines allow states to increase the number of recipients who are eligible for Medicaid and/or SCHIP, it potentially limits the benefit packages currently provided by both programs.

The HIFA guideline stipulates that states must adhere to "current-level Medicaid and SCHIP resources," while allowing broad expansions in those eligible. The HIFA "budget-neutrality" clause restricts how much each state can spend on program expansions.

The HIFA initiative does not provide extra federal funds to pay for these expansions and may require significant cuts to the benefits packages, increased cost-sharing or enrollment caps to maintain affordability.

The new guidelines are unclear regarding whether the budget agreement will encompass spending on only the newly covered populations, all the populations affected by the waiver or the entire Medicaid program.

This could indirectly effect the funding available for the mandatory groups as states attempt to stay under the cost neutrality caps.

The Kaiser Family Foundation reports that over 11.7 million people are currently in the optional populations; including, 4.2 million children, 3.7 million parents, 1.5 million disabled and 2.3 million elderly. (3)

While applauding the opportunity to expand coverage, some policy makers are concerned about the impact of reducing health care benefits for such a large population in order to pay for continued expansions.

The proposal also allows states to set up higher cost-sharing arrangements than currently allowed under Medicaid or SCHIP regulations. Current rules prohibit states from setting up more than nominal premiums, co-payments and deductibles for services.

This can be a barrier for some low-income workers.

Who benefits from HIFA?

The overall principles of HIFA, particularly the streamlined waiver application process are considered by some to be an important first step toward Medicaid reform.

While HIFA does provide more flexibility to states, it does not help states that already expanded services to optional or expanded populations unless they are willing to reduce benefits to those covered populations.

For states that have not yet made these expansions, reduced benefits are probably more doable.

The initial HIFA guidelines leave a number of additional concerns:

* The requirement that the waiver demonstration projects must be statewide may prevent states from piloting expansion programs in regions or limited areas.

* The budget neutrality clause may be too restrictive for most states to even consider participation because it limits the amount of spending on a larger number of people.

* The cost savings from reducing benefits services may not bring in enough money to offset the cost to finance meaningful expansions.

* It is not yet clear whether states are encouraged or required to participate in the private insurance cost-sharing component of the HIFA demonstration initiative.

* The need for comprehensive coverage will prohibit states from using this program to craft narrow, specialized services that may be desirable.

* Finally, there is concern that some may not use the savings to improve or expand coverage, but instead divert it to other programs.

Expanding coverage to the uninsured remains a national priority. State policy makers need to evaluate whether this initiative meets their needs.

The ability of states to increase funding for this initiative is a potential barrier because of the slowing economy. Ensuring that coverage expansions include an adequate benefit package will also be a challenge.


(1.) Health Insurance Flexibility and Accountability (HIFA) Demonstration Initiative Guidelines.

(2.) "President Announces Medicaid Reform in Weekly Radio Address." President George W. Bush, August 4, 2001

(3.) Kaiser Family Foundation, Fact Sheet, 2001
COPYRIGHT 2001 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Author:Benjamin, Georges C.
Publication:Physician Executive
Geographic Code:1USA
Date:Nov 1, 2001
Previous Article:Merger Mania What will a merger mean to you? (In The Trenches).
Next Article:Flexibility and Choice Spark Changes to PIM and MMM Program.

Related Articles
Medicaid change allows dramatic expansions.
California County Provides Children's Health Insurance.
In a Land of Plenty--Uninsured Without Health Care.
Coverage for All.
Managing Medicaid in tough times: states are struggling with soaring Medicaid costs. Some are using short-term solutions, others have launched bold...
Hurdles of health care reform: the obstacles are enormous, and so are the stakes. But there are some new ideas for reining in health care costs and...
Covering the uninsured: the debate returns. (Health Policy Update).
Providing children with health care.
How secure is the safety net? The future of the nation's community health care centers and public hospitals is grave.
Medicaid extreme makeover: with growing numbers of uninsured people and costs out of control, states are looking at radical changes to Medicaid.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters