For immediate release:
Tuesday, April 25, 2006
12:01 a.m. EDT


Christopher Fleming

Most States Have Used HIFA Waiver Process To Expand Coverage Without Cutting Benefits For Existing Enrollees

 About Three Hundred Thousand Are Covered Under HIFA,
Say Urban Institute Researchers

Bethesda, MD -- States have used the Bush administration’s Health Insurance Flexibility and Accountability (HIFA) initiative primarily to expand coverage, not to cut costs, a new Health Affairs Web Exclusive states. The article, which looks at HIFA demonstration programs in ten states, comes just after Congress has given states even more power to restructure their Medicaid and State Children’s Health Insurance Program (SCHIP) offerings in the recently passed Deficit Reduction Act.
Launched in 2001 under Section 1115 of the Social Security Act, HIFA simplifies the Medicaid and SCHIP waiver application process, making it easier for states to vary benefits and cost sharing across different populations and to extend benefits to new groups of low-income “expansion enrollees.” In designing their HIFA programs, “states showed a particular interest in expanding coverage to groups that have historically been excluded from publicly sponsored coverage, such as childless adults, higher-income parents, and the working poor,” Teresa Coughlin, a principal research associate at the Urban Institute, and her coauthors report. Coughlin’s team studied HIFA demonstrations in Arizona, California, Colorado, Idaho, Illinois, Maine, Michigan, New Jersey, New Mexico, and Oregon.

When the administration introduced HIFA, some observers were concerned that states would finance coverage for expansion enrollees partly at the expense of those already receiving benefits. Contrary to these fears, though, “eight of the ten states made no changes in benefits or cost sharing for current Medicaid and SCHIP enrollees.” Oregon’s HIFA demonstration, a revamping of the state’s long-running Section 1115 demonstration known as the Oregon Health Plan, was the major exception to this trend, making substantial changes in both benefits and cost sharing for existing Medicaid enrollees.

States took various routes in designing benefit packages for expansion enrollees. Arizona, Colorado, Illinois, and Maine offer expansion enrollees who receive direct coverage (as opposed to premium assistance) the same benefits afforded to existing Medicaid and SCHIP enrollees. At the other end of the spectrum, Michigan’s more limited benefits for expansion enrollees do not include hospital inpatient coverage; New Mexico created a new commercial insurance product for expansion enrollees, with narrower benefits and higher cost sharing than the state’s Medicaid package.

States Have Added New Money, But Fiscal Pressures Still Impede Progress

“Reflecting their interest in expanding coverage, most states committed new funds to finance the coverage expansions, which is particularly noteworthy considering states’ dismal financial climates” in the early 2000s, say Coughlin and coauthors Sharon Long and John Graves of the Urban Institute and Alshadye Yemane of the Congressional Budget Office. But budget problems forced some states to impose enrollment caps on their HIFA demonstrations, and California, which received federal approval in January 2002, has not been able to implement its HIFA program at all because of budgetary problems.

All told, the researchers estimate, as of December 2005 approximately 300,000 people were covered under the HIFA programs studied, “although part of the enrollment that has taken place under HIFA has been ‘rolling over’ coverage that had been provided under a state-funded program before the demonstrations were implemented.” Although a substantial number, 300,000 is still well short “of the projected increase of 820,000 across the ten states. In large part, this is attributable to California not implementing its demonstration,” Coughlin and coauthors observe.

The article can be read at


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