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What Trump’s pick to run Medicaid did for the white working class in Indiana

Seema Verma arrives at Trump Tower in New York City on Nov. 22. Donald Trump has nominated her to take charge of Medicare and Medicaid. (Photo by Drew Angerer/Getty Images)

As a candidate, Donald Trump offered scant information on what he would do for the white working class, the demographic group that many analysts have said gave him his victory. That is changing now that Trump is naming people to his cabinet.

On Tuesday, Trump nominated Seema Verma, a former adviser to Vice President-elect Mike Pence, to oversee the the agency that administers Medicare and Medicaid. Verma and Pence, who is the governor of Indiana, worked with the Obama administration to expand Medicaid to more of the state's poor and working-class residents, who are overwhelmingly white.

Verma, a private-sector consultant who has worked on Medicaid with officials in several states, is usually credited with the design of Indiana's program.

The new system has provided coverage to hundreds of thousands of people of modest means who were previously uninsured. At the same time, the design burdens patients with more paperwork and more out-of-pocket expenses compared to similar programs in other states.

Under the new rules, beneficiaries pay for their own insurance, but they receive savings accounts from the government worth $2,500 each to help cover their out-of-pocket costs.

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An intricate system of additional rules, designed to encourage recipients to save money and get check-ups, determines the kind of coverage that beneficiaries receive, as well as whether they can keep any money remaining in their accounts at the end of each year. Another component of the system offers beneficiaries help finding employment.

The expansion began last year, and health-care experts say it is too early to offer a conclusive analysis of Indiana's program based on the data so far.

A report commissioned by the state found that, after one year, the program had extended coverage to about 207,000 people who were not enrolled in Medicaid previously. The expansion primarily benefited the working poor -- people with enough income that they did not qualify for Medicaid under the old system, but who were still too poor to receive financial help from the federal government for private, individual plans on the exchanges established by the Affordable Care Act.

Including those who were in a program already, total enrollment stood at 346,000 as of January, a figure that is expected to increase as more people learn about the program.

Of those who are enrolled, 249,000, or about 72 percent, are white. It is impossible to say how many of them voted for Pence and his running mate, but 64 percent of white voters in Indiana cast ballots for Trump, according to exit polling.

Conservative realism

Joseph Antos, an economist at the conservative American Enterprise Institute, described Indiana's system as a compromise between Pence's conservative positions on health care and the Obama administration's agenda.

"Mike Pence is a realist," Antos said. "He has principles, but he’s a realist."

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More people received coverage, a major goal of Obama's health reform. However, in contrast to Medicaid recipients in other states, beneficiaries in Indiana are responsible for paying additional costs, such as co-payments or premiums in the form of contributions to the savings account. These provisions are designed to encourage recipients to plan ahead and save money by only seeking medical treatment when it is necessary, an important point for conservative reformers.

"Obviously, they weren’t just sticking to some doctrinaire view of the way things ought to be," Antos said of Pence and Verma. "They were recognizing that they had to negotiate. To me, that’s a good sign."

For her part, Verma has argued that Indiana's system -- which has some elements in common with typical plans sponsored by employers -- would educate beneficiaries about modern health insurance.

The system's "consumer-driven design familiarizes its members with the concepts of commercial health insurance and encourages them to be prudent consumers, comparing cost and quality of health care services," she and Brian Neale, another of Pence's advisers, wrote in Health Affairs in August.

A complex system

Opponents of Indiana's system say that while it forces subscribers to shell out more in the form of co-payments and required contributions, the rules are too byzantine for participants to take them into account in making decisions about their health care.

"It's not that I disagree with what they’re trying to accomplish," said Judith Solomon, the vice president for health policy at the liberal Center on Budget and Policy Priorities in Washington. "There doesn't seem to me to be evidence that this approach is the way to get there."

Beneficiaries "don't really seem to understand it," she added.

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Rather than saving money, she argued, the complexity of plan is more likely to impose additional administrative costs on the government.

Two versions of Indiana's plan are available to recipients. One offers more comprehensive coverage, but beneficiaries must pay the premiums in the form of contributions to the account. The other version does not require contributions, but offers less comprehensive coverage and requires more co-payments.

For those in the more comprehensive plan, only about 48 percent were aware that they had a savings account, according to the results of a survey included in the report commissioned by the state. For those in the less comprehensive plan, about 35 percent said they had an account.

"So few people even know they have accounts," Solomon said.

The report found that about 21,000 people were shifted from the more comprehensive plan into the less comprehensive version because they failed to make the contributions. Two-thirds of them said that some kind of confusion about how the system worked or an "administrative issue" was the reason for the switch, according to the survey.

With respect to the co-payments, the report provides evidence that many patients simply ignore this provision intended to penalize unnecessary medical treatment. Only 52 percent of providers in a survey said that they were receiving required co-payments from most patients.

Spreading the model

Another set of rules is designed to reward patients for getting check-ups, cancer screenings or other preventive care that is recommended based on age and gender.

Every 12 months, the state allows beneficiaries to save some of the money in their accounts for the next year, another reason for recipients not to spend the money on medical treatment unless they really need it. The amount they can save depends on whether they seek preventive care.

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In the survey, however, nearly half of those enrolled in the more comprehensive plan and nearly two thirds of those in the less comprehensive plan could not give the correct answer to a question about how this aspect of the system would affect them specifically.

With Verma in office, governors in other states could add even more rules.

She is currently working with the state of Kentucky, where Gov. Matt Bevin, a Republican, wants to create a system similar to Indiana's but with a second savings account that would include monetary rewards for volunteering or participating in vocational training. The Obama administration has opposed making benefits dependent on whether Medicaid recipients work.

With requirements of this kind, the details are crucial, Antos said. While people who are able to work should do so, some may be unable to find a job, he argued. Others might be physically unable to participate in the labor force, even without having a disability.

"The bones and the muscles don’t work anymore," he said.