In the debate over the expansion of Arkansas’ Medicaid program through the so-called private option, opponents say they don’t want to add to the federal debt or burden state taxpayers when Arkansas eventually begins paying some of the cost for the expansion.
Supporters say the private option should be given a chance to work. Ending the program now, they say, wouldn’t be fair to the 100,000 people who are already enrolled and would leave state government with millions of dollars in additional costs.
Those costs include money that would be needed if the state decided to restore limited health benefits to people who are now covered by the private option.
John Selig, director of the Arkansas Department of Human Services, said the private option is working “just as we had planned” and “is a model that people around the country are looking at” as an alternative to expanding the traditional fee-for-service Medicaid program.
He noted that when the Legislature created the private option last year, it set an end date for June 30, 2017, giving lawmakers a chance to decide whether to reauthorize the program the same year that the state would begin paying a portion of the cost.
“I would hope that we would at least see it through that three-year period and then make a thoughtful decision, informed by experience, about whether this is something we want to continue,” Selig said.
The 2010 federal healthcare overhaul law required states to expand Medicaid to adults with incomes of up to 138 percent of the poverty level, but the expansion became optional after the U.S. Supreme Court ruled in 2012 that part of the law was unconstitutional.
In Arkansas, the expansion made an estimated 250,000 people - those with incomes of up to $15,860 for an individual or $32,500 for a family of four - eligible for insurance coverage.
Under the private option, most of those who enroll receive coverage through a private plan on Arkansas’ health-insurance exchange, with the Medicaid program using federal dollars to pay the premiums. The healthcare overhaul law also created the insurance exchanges.
About 10 percent of enrollees - those who are found to have exceptional health needs - are assigned to the traditional fee-for-service Medicaid program.
The federal government will pay the full cost of covering the newly eligible enrollees until 2017, when states will begin paying 5 percent of the cost. The state’s share will then rise each year until it reaches 10 percent in 2020.
Last year, Arkansas lawmakers narrowly approved the spending of federal funds for the program with a required three-fourths majority in both houses of the Legislature.
Whether the Legislature would reauthorize spending beyond June 30 of this year became unclear after one former supporter, Sen. Missy Irvin, R-Mountain View, announced that she had changed her position, and Sen. John Cooper, R-Jonesboro, was elected to replace Democrat Paul Bookout, who had supported the funding.
The Senate last year approved funding with 28 votes, one more than was required.
Last week, the Legislature’s Joint Budget Committee endorsed a proposed compromise that would reauthorize the private option while barring the Human Services Department from encouraging enrollment through advertising or other outreach efforts. Amendments to the appropriation bills for the Insurance Department and Department of Health would impose similar bans on those departments.
The legislation also specifies that the program will end Feb. 1 if the federal government doesn’t approve waivers allowing the state to collect co-payments and other charges from certain recipients, design its own nonemergency medical transportation program for recipients and launch a health-savings account program for participants.
The House is expected to vote Tuesday on the appropriation bill for the Human Services Department’s Medical Services Division, including $915 million in federal funds for the private option.
Sen. Jim Hendren, R-Sulphur Springs, who voted against the private option last year, said the amendments to the appropriation bill “didn’t change my mind, and I don’t think it changed the minds of many of us who opposed this from the beginning.”
He said he’s opposed to increasing the federal debt to fund Medicaid expansion and hasn’t been convinced that the state would be able to afford its share of the cost in future years.
“My opposition to it is that it’s not sustainable,” Hendren said. “I think it’s going to drain resources from those who are in far worse situations - those who are elderly, those who are disabled.”
The Joint Budget Committee’s Special Language Subcommittee last week rejected a proposal by Hendren to end the program Dec. 31.
Rep. Nate Bell, R-Mena, who introduced the proposals to bar state advertising for the private option, said he also wants the program to end but recognizes that opponents don’t have the votes to also pass a budget for the Human Services Department’s Medical Services Division that does not contain the private-option funding.
He said his proposal would “minimize the exposure of Arkansans” while giving lawmakers a chance to evaluate the program’s results.
“You can defund this thing all day long, but there’s a whole lot of things that were done that would have to be undone,” he said. “It’s simply not sound policy to say defund and walk away.”
Human Services Department spokesman Kate Luck said officials don’t believe the ban on outreach would have a significant effect on enrollment.
“We don’t currently advertise or promote [the private option] right now, so it wouldn’t be a huge change to our agency,” Luck said, adding, “The majority of enrollments we are seeing right now are just simply word of mouth.”
The appropriation amendments would ban promotion of the state’s insurance exchange, forcing the Insurance Department to scrap a program in which it has used federal grant money to pay the Health Department and other government agencies, nonprofits and private companies to hire outreach workers to help people enroll for coverage.
The Insurance Department had planned to spend $7 million on the program in fiscal 2015, down from $18.5 million this year, the first year of enrollment in the exchange, department spokesman Heather Haywood said.
Insurance Commissioner Jay Bradford said that elimination of the outreach program would slow enrollment in the exchange, but that the effect would be much less than the loss of the private option.
Private-option enrollees are included in insurance companies’ risk pools along with others who sign up for individual insurance plans.
Bradford and other officials have said that the premiums’ revenue to the insurance companies, coupled with the fact that private-option enrollees have tended to be younger than others signing up for plans on the exchange, will help keep premiums on the exchange from rising.
Reducing hospitals’ expenses for uncompensated care by providing more people with coverage also will help lower health-care costs for all Arkansans, Bradford said.
“It’s an issue that affects everybody,” he said.
Bo Ryall, director of the Arkansas State Hospital Association, said that eliminating the private option would put the state’s hospitals in “a heck of a bind.”
Because of the federal health-care law and automatic federal spending cuts, Medicare reimbursement to the state’s hospitals was cut by about $268 million, or about 10 percent, last year, said Paul Cunningham, the association’s executive vice president.
Over the next 10 years, cuts in Medicare reimbursement to the state’s hospitals are expected to total $2.5 billion, Ryall said. To offset the cuts, hospitals are counting on the expanded Medicaid program to reduce their spending on uncompensated care, Ryall said.
“We’ve got the uncompensated care that continues to increase,” Ryall said. “Hospitals are depending on the private option and the results that will come from that.”
State budget officials have said that eliminating the private option would leave the state with an $89 million gap in revenue in fiscal 2015, the budget year that begins July 1.
State budget administrator Brandon Sharp said $42 million of that represents the cost of providing limited health benefits to low-income Arkansans under programs that were reduced or eliminated because of the private option and subsidized coverage available through the insurance exchange.
For instance, the traditional Medicaid program provides maternity care for women with incomes of less than 200 percent of the poverty level, with the state providing a portion of the funding, but enrollment in that program is expected to be lower because of the coverage available under the private option and the insurance exchange.
Medicaid programs that were eliminated Dec. 31 include ARHealthNetworks, which had provided health benefits to almost 20,000 small-business employees and others with incomes of up to 200 percent of the poverty level.
During the fiscal year that ended June 30, 2013, spending on the program totaled $45 million, with $33 million coming from the federal government and $12 million from the state.
Other programs that were eliminated provided coverage for the treatment of breast and cervical cancer, tuberculosis treatment and contraceptives and other family planning services.
The eliminated programs would not automatically be restored if the private option ended. But Sharp said the estimated cost of ending the private option essentially assumes that the state would restore them or replace them with something similar.
Otherwise, he said, “you leave 100,000 people without insurance.”
Most of the remaining cost of eliminating the private option would come from the need to restore funding for uncompensated care provided by the Department of Health, community health centers, mental health centers and the University of Arkansas for Medical Sciences, Sharp said.
The cost also includes $2.8 million to restore funding to the Department of Correction for the medical care of state inmates. The expansion of the Medicaid program allows the state to use federal dollars to pay for inmates’ medical care when an inmate is hospitalized outside the prison gates for more than 23 hours.
In addition to the $89 million the state would save by keeping the private option, it will get revenue from a 2.5 percent tax that the state levies on all insurance premiums. That tax is expected to generate about $30 million a year, Selig said.
The federal Medicaid dollars are also expected to generate economic activity that will result in additional tax revenue, helping the state pay its share of the cost in 2017 and beyond, Selig said.
Through the insurance exchange, people with incomes of less than 400 percent of the poverty level are eligible for federal tax credits to help them buy coverage.
But those credits are not available to people who qualify for Medicaid or have incomes of less than the poverty level. Of the more than 96,000 people who had completed enrollment in the state’s expanded Medicaid program as of Feb. 6, 82 percent had incomes below the poverty level and would not be eligible for the federal tax credits.
Front Section, Pages 1 on 02/16/2014