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Changes to Arkansas' Medicaid expansion program seen to save $356M

Income cutoff, work requirement touted as state awaits U.S. waiver by Andy Davis | March 4, 2018 at 4:30 a.m. | Updated March 5, 2018 at 4:30 a.m.

Proposed changes to Arkansas' Medicaid expansion program would reduce its cost by more than $356 million in the fiscal year that starts July 1, according to state Department of Human Services estimates.

The estimates include $307 million in federal and state funds saved by restricting eligibility to people with incomes of up to the poverty level, instead of 138 percent of the poverty level.

Imposing a work requirement on many of those remaining on the program would save an additional $49.4 million, the department calculated.

The department estimated the changes, which require federal approval, would result in 62,998 people being moved off the program, known as Arkansas Works. The estimates don't specify how many would lose coverage as a result of each change.

Human Services Department officials have said previously that they expect the income cutoff change to result in about 60,000 people being moved off Arkansas Works. More than 285,000 people were enrolled in the program as of Jan. 1.

Without the changes, the projected cost of the program during fiscal 2018, which ends June 30, and fiscal 2019 combined would be almost $334 million more than what state officials initially projected for those two years because of higher-than-expected enrollment, according to documents provided to the Arkansas Democrat-Gazette under a state Freedom of Information Act request.

"I wish I could paint a better picture for SFY 2018 but [can't] given that we will be paying for more than 50,000 people per month than what was budgeted," David McMahon, the department's deputy chief financial officer for medical services, said in a Nov. 17 email to other department officials.

Gov. Asa Hutchinson proposed the changes, which were endorsed by the Legislature last year, as a way of saving the state money and encouraging enrollees who aren't working to find jobs.

He is expected to make an announcement on Monday with Seema Verma, the administrator for the federal Centers for Medicare and Medicaid Services, who would have to approve any changes to the waiver authorizing Arkansas Works.

In a statement on Friday, Hutchinson said he expects an update from Verma "as to where we are on all aspects of the waiver, from the work requirement to the change in income eligibility."

Later in the week, legislators are expected to vote on the fiscal 2019 appropriation bill for the Human Services Department's Medical Services Division, which includes Arkansas Works.

"I do know that's one of the things that would help some people have more comfort with the program, if they saw continued progress in controlling the growth and the cost of it," said Senate Majority Leader Jim Hendren, R-Sulphur Springs, who is Hutchinson's nephew.

Hutchinson has indicated that a ruling on the work requirement is likely to come before a decision on the change to the income threshold for eligibility.

None of the savings from the requested changes were factored into Hutchinson's appropriation request to the Legislature, Human Services Department officials said.

Hutchinson said Friday that the cost of Arkansas Works is "manageable" even without the change in eligibility criteria because of steps taken to reduce the state's overall Medicaid costs.

"However, without continued reform that we're pushing for, our options become limited in the future in terms of meeting other priorities," he said.

Marquita Little, health policy director for Arkansas Advocates for Children and Families, said the work requirement will result in "more of a cost shift than a cost savings" as enrollees who fail to comply have their coverage terminated.

"We are going to see those people rely on the ER once again for their care," she said.

Hutchinson said he has "no reason to believe there will be a significant increase in uncompensated care."

"These are individuals that are able-bodied and of working age, with no dependents," he said. "These are the very individuals who should be working -- who want to be connected to work."

Human Services Department officials have said the proposed changes would take about 60 days to implement after they are approved. On Friday, a state website,, contained a link to a portal allowing enrollees to report work activities or exemptions.

Prior to the expansion authorized by the 2010 Patient Protection and Affordable Care Act, eligibility for Medicaid coverage in Arkansas was largely restricted to children or disabled or elderly people with low incomes and parents with incomes of up to 17 percent of the poverty level.

The current income cutoff amounts to $16,753 for an individual or $34,638 for a family of four.

During this fiscal year, which ends June 30, state officials initially projected that the program would cost $1.8 billion without the work requirement or eligibility change.

Of that amount, more than $100 million was expected to be paid by the state, with the federal government paying the rest.

By late last year, the projected total cost had increased by almost $169 million, to almost $2 billion, because of higher-than expected enrollment.

That included an increase of about $8 million, to $108 million, in the state's budgeted share.

Similarly, the more than $2 billion projected cost for Arkansas Works in the fiscal year that starts July 1, without the state's requested changes, is about $165 million more than officials had predicted in preparation for last year's legislative session.

The state's share, $135.6 million, is about $10.5 million higher.

Under the Affordable Care Act, the state was responsible for 5 percent of the cost of Medicaid expansion from January through December of last year.

The state's share increased this year to 6 percent and will rise to 7 percent in 2019 and 10 percent for 2020 and beyond.

Implementing the work requirement alone would reduce the state's cost in fiscal 2019 by $3.4 million, while reducing the income cutoff for eligibility would save an additional $20.5 million, the department estimated.

The work requirement would be applied in the first year to enrollees age 30-49 and would then be extended to those age 19-29, Human Services Department officials have said.

Enrollees would be considered in violation of the requirement if they failed to spend 80 hours a month working or on other approved activities, such as taking classes, looking for jobs or volunteering.

Those who fail to meet the requirement for three months during a year would have their coverage terminated and wouldn't be able to sign up until the following year.

That's harsher than the penalties for violating work requirements approved earlier this year in Kentucky and Indiana. In those states, enrollees can regain coverage after coming into compliance with the requirement.

Suspending Arkansans' eligibility for coverage is "an incredibly concerning, punitive aspect of our work requirement that really serves no real purpose except to sort of teach these folks a lesson," Little said.

She said most Arkansas Works enrollees are already working or would qualify for an exemption because they are attending school or caring for a relative.

Enrollees who are pregnant, living with dependent children, receiving welfare benefits or participating in a drug or alcohol treatment program also would be exempt.

Those who wouldn't qualify for an exemption and aren't already working likely face barriers, such as a lack of transportation, that would make holding down a job difficult, Little said.

"I just I don't see where [the work requirement] will save a significant amount of costs, and certainly if those costs come from people inappropriately losing coverage, then I wouldn't consider that a win," Little said.

Hutchinson said the work requirement is designed to align with the individual insurance market, which generally restricts enrollment to annual sign-up periods.

The requirement is "not punitive," he said, and will help connect enrollees with training.

"Right now, we have a low unemployment rate, and we want to move people from being underemployed to a higher level of income," he said.

The cost estimates don't take into account money the state would lose as a result of lower premium-tax collections. Currently most Arkansas Works participants are enrolled in private plans, with the Medicaid program paying the premium. The state then recoups some of that money through a 2.5 percent tax on premiums collected from insurers.

The records provided by the Human Services Department didn't list the administrative costs expected to be associated with the work requirement or indicate whether those costs were factored into the estimated savings.

Hutchinson has emphasized that his $7.5 billion funding request for the entire Medicaid program, including Arkansas Works, for fiscal 2019 is $478 million less than the state had initially projected.

He announced the lower projected cost for Medicaid at a news conference on Jan. 4, but didn't give details about how the projected cost of Arkansas Works had changed.

The initial estimates for Arkansas Works for fiscal 2018 and 2019 were calculated in preparation for the Legislature's general session last year and based on January 2015 projections by Optumas, a Scottsdale, Ariz.-based consulting firm.

Those projections were updated in preparation for the fiscal legislative session that started last month.

The more recent projections estimate that, with no changes, an average of 307,597 Arkansans will be enrolled in Arkansas Works during the fiscal year that starts July 1, up from an initial projection of 258,314.

At the same time, the projected per-person cost has been reduced because of lower-than-expected expenses associated with enrollees who are considered medically frail. Those enrollees, who make up about 10 percent of Arkansas Works participants, receive coverage through the traditional fee-for-service Medicaid program because they have health needs that private plans typically don't cover.

Optumas initially projected the state would spend an average of $865.42 a month for each medically frail enrollee in fiscal 2019, but the state now expects that cost to be just $487.64.

That lower cost more than offsets a slightly higher-than-expected cost of providing coverage through private plans. Optumas had projected the private coverage would cost an average of $593.65 per enrollee each month in fiscal 2019, but the state now expects that cost to be $596.15.

The costs for those in private coverage include payments to insurers as well as supplemental benefits, such as nonemergency medical transportation, that the private plans don't cover.

Including both the medically frail and enrollees in private coverage, the projected cost per enrollee per month in fiscal 2019 has dropped from $620.82 under the earlier estimates to $566.12.

Hutchinson has noted that, even without changes to Arkansas Works, enrollment in the program fell by almost 59,000 people from Jan. 1, 2017, to Jan. 1, 2018. He credited an improving state economy and efforts to remove enrollees who were no longer eligible.

"I see the trends going in the right direction, but it's certainly not time to take the foot off the gas and quit trying to reform the program," Hendren said. "Any government program will grow out of control, left unattended, so we're going to continue to work on it."

SundayMonday on 03/04/2018

Print Headline: Medicaid restyling seen to save $356M


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