Why South Carolina won’t follow Arkansas’s Medicaid lead

April 3, 2013

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition — and read all previous columns here.

Stephanie Dugger gets a flu shot from nurse Bhagwati Bhakta at Mollen Immunization Clinics in Scottsdale, Ariz., Jan. 10, 2013. (Cheryl Evans/The Arizona Republic/AP Photo)
Careful, this Medicaid expansion might hurt. (Cheryl Evans/The Arizona Republic via Associated Press)

Correction: An earlier version of this story said Louisiana Gov. Bobby Jindal was interested in an Arkansas-style Medicaid expansion, as reported by the New Orleans Times Picayune. Jindal spokesman Kyle Plotkin says that the governor is not interested in such an approach. 

A growing number of Republicans are really excited about the idea of using Medicaid expansion dollars to buy private insurance coverage, ever since Arkansas raised the idea about a month ago.

Tony Keck is not among them.

"If Republicans are for this plan, I don't know what exactly they were against before," says Keck, who runs South Carolina's Medicaid program. "It covers the same number of people, with the same benefits and is more expensive. I have a hard time understanding what it is that some of these Republican legislators like about that."

As South Carolina's Medicaid director, Keck has long opposed the Affordable Care Act's Medicaid expansion. He wrote a piece for Wonkblog about this right after the Supreme Court decision, in which he argued that accepting the additional federal dollars was unlikely to improve the health of South Carolinians.

Keck is a bit of a countervailing voice in the Republican party right now. Staunch opponents of the law, including  Maine Gov. Paul LePage, have shown some interest in the Arkansas option. They like the idea of moving low-income people out of the public insurance program and into the individual marketplace, where they would shop for private plans like other, subsidized state residents.

Keck isn't completely alone. Former Mitt Romney health adviser Avik Roy has become skeptical of the plan as he's learned more details, as has Dennis Smith, who previously worked as Wisconsin's Medicaid director under Scott Walker.

Keck argues that there's no reason to favor this version of the expansion, if you oppose the concept of the Medicaid expansion. In an interview Monday, I had him explain why.

To start, Keck goes back to his philosophical argument about the Medicaid expansion. If the current health insurance system doesn't help people get healthier, why should we expect a bigger version of the program to do better?

"We're opposed to spending way too much money, in general, on a health-care system where we get way too little in return," Keck says. "I'd rather focus on getting more value for our dollars, and improving the system, rather than just making the system bigger."

Let's say, though, that a Republican governor does disagree with Keck. He thinks there is value in bringing more Medicaid dollars into the state, even if it means some additional state spending on the program. In that situation, Keck argues that buying private insurance is one of the worst ways to use those extra funds.

"It's Medicaid but more expensive and complicated," Keck says. "There's no other way to look at it."

If states do move Medicaid patients into private coverage, the Obama administration has said that states need to ensure they have access to the exact same benefits they would in the public program. That probably includes benefits rarely, if ever, covered by private plans, such as arranging for transportation to and from appointments.

Figuring out how to cover benefits like these, Keck argues, makes the program more of a headache for a state Medicaid office. Under a traditional Medicaid expansion, these would all be included automatically.

On the point of cost, one argument Arkansas officials have made is that health plans will become more competitive if more people (all those Medicaid recipients) come into the marketplace. When you have hundreds of thousands of potential customers to sway, the thinking goes, you'll try and woo them with better prices.

The Obama administration has also argued that the health insurance exchanges will drive down premiums using similar logic.

Keck, however, is skeptical. He points out that lots of consumers shopping the health insurance exchange will have tax subsidies that limit the amount they're expected to spend on premiums. An individual making $17,235 (150 percent of the poverty line) won't be expected to spend more than 2 percent of her income on premiums, regardless of the plan's actual price. It's hard to compete on price, Keck argues, when most of your customers know they'll pay a fixed sum.

"When you subsidize something, it sends prices up," Keck says. "It's hard for me to understand why folks think that exchanges run like this, which are heavily subsidized, would reduce the cost of insurance."

Keck has been asked a number of times whether this is an approach that South Carolina might consider. His answer, no surprise at this point, is that South Carolina isn't interested — not in the standard Medicaid expansion, or in the Arkansas-style one.

"Republicans are looking for a way to expand insurance but not call it Obamacare," he says. "The goal here is not universal coverage. The goal is getting people healthy. That's why we're doing something much different."

KLIFF Notes: Top health policy reads from around the Web.

Pennyslvania is eying an Arkansas-style Medicaid expansion. "Gov. Tom Corbett is suggesting that he's interested in a concept that combines an expansion of Medicaid eligibility for hundreds of thousands of uninsured Pennsylvanians by using federal dollars to buy private insurance plans." The Associated Press.

Even though it's not in the state budget, Tennessee Gov. BIll Haslam is still interested in expanding Medicaid. "Gov. Bill Haslam said Tuesday that his ongoing pursuit of a special deal for Medicaid expansion in Tennessee is no "fool's errand" and that an arrangement could still be struck at any time. The Republican governor said he remains in negotiations with the federal government over his proposal to use $1.4 billion in Medicaid money available under the federal health-care overhaul to pay for private coverage for uninsured Tennesseans." Eric Schelzig in the Associated Press.

Will insurers use a little-known loophole to dodge Obamacare's mandates? "A new fight is brewing over health insurance companies letting millions of Americans renew their current coverage for another year — and thereby avoid changes under the federal health-care law. At issue is a little-known loophole in President Obama's landmark legislation that enables health insurers to extend existing policies for nearly all of 2014. This runs contrary to the widespread belief that all health insurance must immediately comply with new federal rules starting Jan. 1, when most provisions of the law take effect." Chad Terhune in the Los Angeles Times.

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