Indiana on Friday became the second state to win federalapproval to add a work requirement for adult Medicaid recipientswho gained coverage under the Affordable Care Act, but a less debated“lockout” provision in its new plan could lead to tens of thousands ofenrollees losing coverage.

The federal approval was announced by Health and Human ServicesSecretary Alex Azar in Indianapolis.

Medicaid participants who fail to submit in a timely mannertheir paperwork showing they still qualify for the program will beblocked from enrollment for three months, according to the updatedrules.

Since November 2015, more than 91,000 enrollees in Indiana werekicked off Medicaid for failing to complete the eligibilityredetermination process, according to state records. The processrequires applicants to show proof of income and family size, amongother things, to see if they still qualify for the coverage. Untilnow, these enrollees could simply re-apply anytime. Although manyof those people likely were no longer eligible, state officialsestimate about half of those who failed to comply with itsre-enrollment rules were still qualified.

Indiana’s Medicaid expansion began in February 2015, providingcoverage to 240,000 people who were previously uninsured, helpingdrop the state’s uninsured rate from 14 percent in 2013 to 8percent last year. The HHS approval extends the program, which wasexpiring this month, through 2020.

The new lockout builds on one already in place in the state forpeople who failed to pay monthly premiums and had annual incomesabove the federal poverty level, or about $12,200 for anindividual. They are barred for six months from coverage. Duringthe first two years of the experiment, about 10,000 IndianaMedicaid enrollees were subject to the lockout for failing to paythe premium for two months in a row, according to state data.

In addition, more than 25,000 enrollees were dropped from theprogram after they failed to make the payments, although half ofthem foundanother source of coverage — usually through theirjobs.

Another 46,000were blocked from coverage because they failed to make theinitial payment.

“The ‘lockout” is one of the worst policies to hit Medicaid in along time,” said Joan Alker, executive director of the GeorgetownUniversity Center for Children and Families. “Forcing people toremain uninsured for months because they missed a paperworkdeadline or missed a premium payment is too high a price to pay.From a health policy perspective it makes no sense because duringthat period, chronic health conditions such as hypertension ordiabetes are just likely to worsen.”

Indiana’s Medicaid expansion is being closely watched in partbecause it was spearheaded by then-Gov. Mike Pence, who is now vicepresident, and his top health consultant, Seema Verma, who nowheads the federal Centers for Medicare & Medicaid Services.

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Kaiser HealthNews (KHN) is a national health policy news service. It isan editorially independent program of the Henry J. Kaiser FamilyFoundation which is not affiliated with KaiserPermanente.

The expansion, known as Healthy Indiana, enabled non-disabledadults access to Medicaid. It has elicited criticism from patientadvocates for complex and onerous rules that require these pooradults to make payments ranging from $1 to $27 per month intohealth savings accounts or risk losing their vision and dentalbenefits or even all their coverage, depending on their incomelevel.

Indiana Medicaid officials said they added the newest lockoutprovision in an effort to prompt enrollees to get their paperworksubmitted in time. The state initially requested a six-monthlockout.

“Enforcement may encourage better compliance,” the state officials wrote in their waiver application to CMS inJuly.

The new rule will lead to a 1 percent cut in Medicaid enrollmentin the first year, state officials said. It will also lead to a $15million reduction in Medicaid costs in 2018 and about $32 millionin savings in 2019, the state estimated.

The number of Medicaid enrollees losing coverage for failing tocomply with redetermining their eligibility has varied dramaticallyeach quarter from a peak of 19,197 from February 2016 to April 2017to 1,165 from November 2015 to January 2016, state reports show. Inthe latest state report, 12,470 enrollees lost coverage from Augustto October 2017.

The Kentucky Medicaid waiver approved by the Trumpadministration in January included a similar lockout provision forboth failing to pay the monthly premiums or providing paperwork ontime. Penalties there are six months for both measures. But theprovision was overshadowed because of the attention to the firstfederal approval for a Medicaid work requirement.

Like Kentucky, Indiana’s Medicaid waiver’s work requirements,which mandate adult enrollees to work an average of 20 hours amonth, go into effect in 2019. But Indiana’s waiver is morelenient. It exempts people age 60 and over and its work-hourrequirements are gradually phased in over 18 months. For example,enrollees need to work only five hours per week until their 10thmonth on the program.

Most Medicaid adult enrollees do work or go to school or are toosick to work, studies show.

Indiana also has a long list of exemptions and alternatives toemployment. This includes attending school or job training,volunteering or caring for a dependent child or disabled parent.Nurses, doctors and physician assistants can give enrollees anexemption due to illness or injury.

Three patient advocacy groups have filed suit in federal court seeking to block the workrequirements.

Robin Rudowitz, associate director for the Kaiser FamilyFoundation’s Program on Medicaid and the Uninsured, said it’sdifficult to gauge whether work requirements or renewal lockoutswill have more of an impact on coverage. She noted bothprovisions apply to most demonstration beneficiaries. (KHN is aneditorially independent program of the foundation).

“Any documentation requirement could lead to increasedcomplexity in terms of states administering the requirements andindividuals complying,” she said, adding that it could result “inpotentially eligible people falling off of coverage.”

Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.