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Arkansas should continue its private-option Medicaid program while adding requirements to encourage healthful behavior and for unemployed recipients to find jobs, a consulting firm recommended Wednesday.

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The Stephen Group executive summary

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The Stephen Group findings

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The Stephen Group recommendations

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The Stephen Group of Manchester, N.H., said the state also should change the way it pays providers for services for the elderly and disabled, which make up the bulk of the state's $6 billion in annual spending on Medicaid.

The consultant also recommended that state government help more people receive services while living at home instead of in nursing homes.

"Your focus has to be on making community-based care a priority," John Stephen, the firm's managing partner, told the Health Reform Legislative Task Force.

The recommendations came in the firm's final report to the task force, which was created earlier this year to explore changes to the state's Medicaid program, including a replacement for the private option.

Under the private option, the state uses Medicaid funds to buy coverage on the state's federally operated health insurance exchange for more than 200,000 low-income Arkansans.

The task force is expected to make its recommendations in December.

Implementing the firm's recommendations would not require the state to have its own health insurance exchange for individual consumers, Stephen said.

He said he did not have a recommendation on whether the state should go forward with a project to establish such an exchange using money from a $99.9 million federal grant.

Gov. Asa Hutchinson, who called for the task force's creation, "was pleased to see cost savings addressed in the report," J.R. Davis, the governor's spokesman said.

The governor "looks forward to studying the report further and discussing it with legislators," he said.

Because most of the funding for the program comes from the federal government, the private option is expected to save the state $438 million from 2017 through 2021 by reducing uncompensated care, reducing spending in the traditional Medicaid program and increasing state tax revenue, Stephen said.

He also credited the program for reducing the number of Arkansans who lack insurance, keeping premiums down in the state's individual insurance market and giving recipients access to more doctors and other health care providers than they would have under traditional Medicaid.

But he said the program lacks measures to encourage healthful behavior and employment by recipients.

Compared with those enrolled in the traditional Medicaid program, private-option enrollees use the emergency room more often, he said.

And he noted that, as of October 2014, 40 percent of enrollees reported having no income.

The firm's recommendations incorporated five of the seven changes that Hutchinson proposed to the task force in August.

Those five recommended changes:

• Subsidizing coverage through employer plans, instead of through the private option, for those with access to job-based coverage.

• Requiring employed enrollees earning at least at the poverty level to pay insurance premiums up to 2 percent of income.

• Requiring referrals to job-training programs for unemployed enrollees.

• Strengthening procedures for verifying recipients' eligibility for benefits.

• Finding ways to cut about $50 million from Medicaid spending to pay the state's share of the private option.

The program is fully funded by the federal government through 2016. Arkansas is expected to begin paying 5 percent of the cost in 2017. The state's share will then increase every year until it reaches 10 percent in 2020.

But the firm recommended against two of Hutchinson's proposals: eliminating the nonemergency transportation benefit and limiting private-option coverage to those earning above a certain income level.

Because it's required by Medicaid rules but not covered by the exchange plans, the state Medicaid program pays for nonemergency transportation directly as a "wraparound" benefit.

Hutchinson has said that eliminating the benefit would save the state about $14 million annually.

The Stephen Group's report said Arkansas has a "very effective brokerage model" for providing nonemergency transportation and that studies have shown the service saves money by helping recipients seek care in the doctor's office for health problems before they worsen and become more costly to treat.

Limiting private-option access would reduce the amount of money the state collects in premium taxes on private-option plans and likely would not accomplish Hutchinson's goal of encouraging employment, the firm said in its report.

To encourage healthful behavior and employment, the state should require participants to agree to stay employed or enroll in job programs and visit a primary-care doctor within six months of enrollment, the report recommended.

Enrollees who abide by the agreement would have access to vision and dental benefits and would not have to pay premiums or pay out of pocket for medical care.

In addition, the firm recommended charging higher premiums to enrollees with substantial assets -- a primary residence worth $200,000 or more or $50,000 or more in cash.

Those participants would pay a premium of $100 per month, plus $4 a month for every $1,000 in assets above the minimum triggering the higher premium.

Those who fail to pay the premiums would lose coverage for six months.

The firm also recommended eliminating health care "independence accounts," which were mandated by the Legislature.

The program encourages private-option enrollees with incomes above the poverty level to contribute up to $15 a month to help pay for the cost of their medical care.

Those who contribute to an account in a given month don't have to pay out of pocket for medical care for that month.

Currently, enrollees with incomes above the poverty level have copayments for some services -- $8 for a doctor's office visit, for instance. Those below the poverty level have no copayments.

Out of 45,839 independence account cards issued since the program began in January, only 10,806 cards have been activated, according to The Stephen Group.

Since February, the number of monthly contributions has fallen from 3,114 to 2,480 in June.

Human Services Department officials have said the program costs about $6 million a year to administer, with half the cost paid by the federal government.

To cut costs, the consultant said the state also should stop covering medical expenses incurred by private-option enrollees before they enroll. Currently the program pays for expenses incurred up to 90 days before enrollment.

The firm also recommended establishing an "enterprise benefit integrity hub" in the state's Department of Finance and Administration to verify recipients' identities and addresses.

A records check indicated that 22,781 recipients in the traditional Medicaid program, and 20,110 private-option enrollees, had out-of-state addresses, according to the report.

Many of the firm's recommended changes would require approval by officials with the U.S. Department of Health and Human Services.

The firm also recommended seeking federal approval to expand access to the state's health exchange for small businesses to all companies regardless of size.

Currently, only companies with 50 employees or fewer can buy coverage on the exchange, which the state is set to take over Nov. 1.

The firm also included a set of "out-of-the-box" recommendations for changes that federal officials have indicated they will not approve.

Those recommendations include requiring private option-enrollees to work at least 20 hours a week or seek jobs and limiting private-option coverage to participants earning up to the poverty level.

Those with incomes of 100 percent to 138 percent of the poverty level would receive coverage through plans on the exchange, with subsidies provided through a combination of federal tax credits and the Medicaid funds, according to the report.

In the traditional Medicaid program, the firm recommended conducting independent assessments of the needs of recipients receiving nursing home care, mental health services and services for the disabled.

It also recommended implementing programs to manage the care of the elderly and disabled or hiring a managed care company to do it.

Hiring a company to manage the care for all recipients in the traditional Medicaid program would save $2.4 billion from 2017-2021, while using such a company for just the elderly and disabled would save $1.9 billion over the same period, the firm estimated.

If the state handled the care-management itself, it could save $708 million, according to the report.

A Section on 10/08/2015

Print Headline: Adviser: Keep private option

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