Healthcare Business News

Ending spend-down program to save Indiana almost $26 million annually

By Virgil Dickson
Posted: February 4, 2014 - 1:30 pm ET

Indiana will save almost $26 million annually by doing away with a cumbersome spend-down program that slowed access to care for tens of thousands of aged and disabled state Medicaid beneficiaries.

Thanks to the state changing its status with the Social Security Administration, residents who are making up to 100% of the federal poverty level—which is $11,670 annually for an individual, and $15,730 for a couple—will have full access to Medicaid benefits without needing to spend any money upfront.

Before this change, some of the state's poorest and disabled residents were required to be part of a spend-down program prior to receiving Medicaid benefits.

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State lawmakers have been trying to do away with the spend-down program on and off for a decade because it is burdensome for state employees, individuals and providers to navigate. Beneficiaries were losing continuous coverage for services because of it, and providers sometimes experienced difficulty collecting payments before the individual's spend-down amount has been met.

The status change was slow in coming because it was difficult to get federal guidance on what the switch would entail logistically, officials said.

Another roadblock was that the beneficiaries using spend down would have lost coverage. The Patient Protection and Affordable Care Act changed that because it allows the state to expand coverage to everyone at 100% of the federal poverty level and under without them having to spend money first.

The more than 76,010 members that were subject to the program will be receiving a letter (PDF) this month that the program will be no more as of June 1.

Patient advocates applauded the news. The program was a “bookkeeping nightmare” that often left both beneficiaries and providers confused, said John Dickerson, executive director of The Arc of Indiana, an advocacy organization for people with intellectual disabilities.

“What they're doing is wonderful and long overdue,” said David Roos, executive director of Covering Kids & Families of Indiana. He added that the old way could be “disruptive to care” at times.

Indiana is able to make the shift because it's changing its status with the Social Security Administration from what is known as a 209(b) state to a 1634 state. A 209(b) state has its own eligibility determination process for receiving Medicaid disability benefits. A 1634 state is one in which anyone declared to be eligible for federal supplemental security income because of a disability is also be found automatically eligible for Medicaid in that state.

Indiana is the first state in two decades to make the transition from 209(b) to 1634, state officials say. It's estimated that fewer than 20 states have a 209(b) status.

Net savings for the state and federal government should hit $35.7 million, with $25.9 million of that being state dollar savings and $9.8 million in federal savings for its fiscal 2015 and each subsequent fiscal year, the Indiana Family and Social Services Administration estimates. These savings mostly come from elimination of administrative costs in maintaining the spend-down program.

Follow Virgil Dickson on Twitter: @MHvdickson

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