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A higher limit on the cost of Arkansas' private option Medicaid program reflects rising drug prices and increased use of medical services by participants, a state Department of Human Services spokesman said Thursday.

Under the terms of a waiver extension approved Thursday by the federal Centers for Medicare and Medicaid Services, the limit on the average per-person cost of the program will rise almost 9 percent next year.

The cap on the average per-person cost of the program will increase to $570.50 a month next year, up from $523.58 this year.

The limit will then increase by 4.7 percent each year until it reaches $685.56 at the end of the five-year "demonstration period" in 2021.

[DOCUMENT: Read letter from Department of Health and Human Services Secretary Sylvia Burwell]

That's higher than the cap proposed by state officials in Arkansas' waiver application in June. At that time, officials proposed a cap starting at $557.62 next year and increasing to $624.09 in 2021.

The cost caps, included as part of the waiver's terms and conditions, are meant to ensure that the federal government doesn't pay more for private-option coverage than it would for an expansion of the traditional, fee-for-service Medicaid program.

The yearly cost limits will be used to calculate an overall cap for the five-year period.

If Arkansas' cost exceeds the cap, it will be responsible for reimbursing the federal government for the difference.

[DOCUMENT: Read letter from from acting administrator of Centers for Medicare and Medicaid Services to Arkansas]

Arkansas officials can ask for adjustments if it appears that the yearly cost caps "underestimate the actual costs of medical assistance," according to the waiver's terms.

Through September, the monthly cost of the private option in 2016 averaged $498.95 per enrollee -- more than $24 below this year's cap.

Brandi Hinkle, a spokesman for the Human Services Department, said in an email Thursday that the higher cap in the approved waiver resulted from higher drug prices "consistent with state and national trends" as well as an "increase in costs due to higher service utilization" by private option enrollees.

A spokesman for Gov. Asa Hutchinson said changes that the state sought and were approved by the Centers for Medicare and Medicaid Services will help control costs under the program that will be known as Arkansas Works starting Jan. 1.

Hutchinson will pursue further changes under the administration of Republican President-elect Donald Trump, spokesman J.R. Davis said.

Actions by the Republican-controlled Congress, whose leaders have vowed to repeal and replace the 2010 Patient Protection and Affordable Care Act, likely also will help, he added.

"We feel good about where we are financially, but the fact is that we're not done pushing for reforms," Davis said.

Sen. Jim Hendren, R-Sulphur Springs, said the need for further changes to the expanded Medicaid program is urgent.

"It's not sustainable the way it is today," said Hendren, who is Hutchinson's nephew.

"It's either going to have to be dramatically changed, or I don't think there'll be legislative support to continue it."

In a letter Thursday to Hutchinson, U.S. Health and Human Services Secretary Sylvia Burwell praised the private option, saying it led to "great progress towards improving health coverage for Arkansans."

"Today's approval of the Arkansas Works model will allow the state to build on this success, while introducing new innovations in how you deliver coverage," Burwell wrote.

Under the private option, the state buys coverage on the state's health insurance exchange for Arkansans who became eligible for Medicaid under the program expansion approved in 2013 by the Republican-controlled state Legislature and the governor then, Mike Beebe, a Democrat.

The expansion extended Medicaid eligibility to adults with incomes of up to 138 percent of the federal poverty level: $16,394 for an individual, for instance, or $33,534 for a family of four.

As of Sept. 30, the expansion was providing coverage to more than 324,000 Arkansans, including 301,009 people who were signed up for private plans and 23,309 others who were placed in the traditional, fee-for-service Medicaid program because they were considered to be "medically frail," with health needs that private plans typically don't cover.

When the Legislature approved the Medicaid expansion three years ago, state officials estimated that 250,000 people would become eligible for coverage.

In a letter Thursday, Andrew Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, announced the agency's approval of the five-year extension of the waiver authorizing the private option as well as changes that Hutchinson has said will encourage enrollees to stay employed and take responsibility for their health care.

Those changes include charging enrollees premiums of about $13 a month and providing coverage to some enrollees through subsidized, job-based coverage instead of private option plans.

State officials have said they expect Arkansas' costs over the first three years of the waiver to come in below the overall cap.

But premium increases for many private-option plans will be higher next year than in previous years.

The premiums for Arkansas Blue Cross and Blue Shield plans, which cover almost half of private-option enrollees, will increase by 9.7 percent, compared with this year's 7 percent increase.

Centene Corp. plan premiums will increase by an average of 4 percent, compared with an increase of less than 1 percent this year.

QualChoice Health Insurance's premiums will increase about 11 percent, compared with an 8.2 percent decrease this year.

The federal government is expected to pay the full cost of coverage for the program through the end of this year, but Arkansas will be responsible for 5 percent of the program's cost beginning in January.

The state's cost then will increase every year until it reaches 10 percent in 2020.

In an initial draft of the extension request, released for public comment in May, state officials proposed a monthly per-member cost cap of $548.19.

Those estimates didn't account for double-digit percentage increases in prescription drug costs experienced by states across the country, the officials said in the final draft application.

The revised figures in the request predicted per-enrollee drug costs will increase 11 percent next year, 9.5 percent in 2018, 7.75 percent in 2019, 6 percent in 2020 and 5 percent in 2021.

Hutchinson said Wednesday that he plans to seek approval from the Trump administration for a requirement that enrollees stay employed.

Hendren, a chairman of a task force exploring changes to the state's Medicaid program, said he also would like enrollees to face higher charges for some services, such as emergency room visits, that federal officials currently don't allow.

Assuming that Congress doesn't cut funding for Medicaid expansion, Hendren said he expects state legislators next year to attach conditions to the state's continuation of the program.

"The numbers are clear, that, barring changes, it will devastate our state budget," Hendren said.

Some of the changes approved by federal officials on Thursday won't take effect right way.

For instance, Hutchinson asked for a waiver of a federal requirement for enrollees to be reimbursed for medical expenses incurred up to three months before their approval for coverage.

The waiver extension allows the elimination of the retroactive coverage, but only after the state submits proof that its backlog of overdue Medicaid applications has been eliminated.

The state also must begin providing "presumptive eligibility" for Medicaid for certain hospital patients, as required under the 2010 Patient Protection and Affordable Care Act, by April 1.

The law allows hospitals that meet state requirements to grant temporary eligibility for Medicaid to patients based on an initial assessment.

Similarly, the waiver's terms say the state will be allowed to offer an extra benefit, such as dental coverage, to certain Arkansas Works enrollees "[t]o the extent an amendment is approved by [the Centers for Medicare and Medicaid Services] and also described in operational protocols developed by the state."

State officials have asked permission to offer the benefit to enrollees who pay any premiums they owe and visit a primary-care doctor.

Hinkle said the state will submit a proposed amendment implementing the dental coverage next year.

A Section on 12/09/2016

Print Headline: U.S. raises private option 'cap' 9%

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