Arkansas’s experiment with ‘private option’ for expanding Medicaid may be in jeopardy


Ellen Louise Fant, 60, of Alexander, Ark., signed up for Medicaid in January under the state’s private option. (Phil Galewitz/Kaiser Health News)
February 11, 2014

Ellen Louise Fant was no fan of the Affordable Care Act.

“I don’t like to have anything shoved down my throat,” said Fant, 60, referring to the law’s requirement that most Americans carry health insurance.

Then last fall, the former teacher’s aide got a letter from the state of Arkansas telling her that because she got food stamps, she qualified for Medicaid, the health insurance program for the poor, which is being expanded under the health-care law to cover those who make less than 138 percent of the federal poverty level, or up to $15,900 for an individual.

She signed a form, got back an insurance card Jan. 10 and, days later, underwent the knee replacement surgery that she had needed for years but couldn’t afford.

Fant is one of more than 80,000 Arkansans who have gained Medicaid coverage under the heath-care law this year through a unique financing arrangement designed to win over Republicans who oppose expanding a government-run program they say doesn’t work.

Affordable Care Act Medicaid expansion

Arkansas’s experiment, known as the “private option,” allows the state to use federal funds to buy private policies for residents who are newly eligible for Medicaid. It marks the first large-scale attempt to enroll Medicaid recipients in the same plans that any consumer might buy in the new online marketplaces.

That’s different from how Medicaid usually works. Typically, enrollees must join state-operated programs or private managed-care plans designed exclusively for the poor. The new option allowed Fant to choose a surgeon from the same broad network of doctors available to anyone buying a private plan, rather than being restricted to a narrower choice of physicians paid directly by the state through traditional Medicaid.

The approach offers Republican lawmakers a politically palatable way to implement a key provision of the 2010 health-care law. It has been adopted on a smaller scale in Iowa and is gaining interest from governors and lawmakers in several Republican-led states including New Hampshire, Florida, Utah and Pennsylvania.

“In crafting the ‘private option,’ Arkansas has provided a pathway for other states,” said Deborah Bachrach, a partner with consulting firm Manatt Health. “They are truly trailblazers.”

Nonetheless, Arkansas’s experiment could end June 30 unless its Republican-controlled legislature — which reconvened Monday — renews its support. And that is looking increasingly uncertain. Last month’s election of a Republican state senator who opposes the deal, as well as the about-face of another GOP supporter, may have tipped the political balance.

“If we lose one or two votes, it’s critical,” Gov. Mike Beebe (D) said in an interview, citing a state rule requiring that 75 percent of the members of both houses pass appropriations measures.

A decision to halt the program in Arkansas could leave as many as 200,000 people who are believed eligible for the program without coverage and have a chilling effect on other states weighing similar efforts. Half the states have not expanded Medicaid since the U.S. Supreme Court made it optional.

Arkansas’s model was crafted by Republican lawmakers who said they opposed the health-care law but were concerned that not expanding Medicaid would hurt the state’s hospitals and businesses because so many patients would remain uninsured.

Beebe, who is in his second term, became a big supporter, saying the plan would help save state taxpayers nearly $90 million this year, primarily from reduced costs for uncompensated care. The federal government is paying the bill for the expanded program through 2016, after which states pick up some costs but never more than 10 percent.

The Obama administration approved the Arkansas plan with two major conditions: that recipients’ benefits and cost-sharing remain the same as in the public program and that total costs are no more than if the state had expanded traditional Medicaid.

Some experts are not convinced they can meet the cost test because the government will have to cover the higher fees that private plans pay doctors and hospitals.

“Whether this will be cost-effective is an open question,” said Joan Alker at the Georgetown University Health Policy Institute.

But Arkansas officials believe any cost difference will be minimal because they would have had to increase payment rates to providers to entice more to participate in the traditional Medicaid program. They also hope to show that enrollees in private plans have better access to care and better outcomes.

“If we are right . . . this is potentially a game changer nationally,” said state Sen. David Sanders, a Republican who helped craft the plan.

Expanding Medicaid is expected to have a big impact in a state where one in five people younger than 65 is uninsured. Until January, Arkansas had the second-most-restrictive Medicaid program in the nation, after Alabama. Single adults were ineligible and parents could qualify only if their incomes were below 17 percent of the federal poverty level.

Despite the roiling politics in Little Rock, most Arkansas stakeholders are enthusiastic.

Doctors and hospitals like the plan because private insurers pay them more than Medicaid. Consumer advocates believe enrollees will have greater access to care because more doctors participate in private insurance. Insurers have embraced it because they would get premiums from many new members.

Some conservatives, however, are still fighting the effort, noting the Medicaid expansion is part of a health-care law they say means bigger government.

State Sen. John Cooper, the tea party Republican who won the special election last month, argued on the campaign trail that the private option won’t save Arkansas money in the long term.

Lawmakers are also hearing complaints from medical specialists, angry that Blue Cross and Blue Shield of Arkansas, the dominant insurer, announced in November it was cutting reimbursement rates by 15 percent to those participating in the private plans.

But for Fant and many like her, the private option model means “peace of mind” because they can get the same care as those with higher incomes.

“While I personally do not like Obama . . . I say, ‘Thank you for doing this for me,’ ” she said, showing her insurance card from Blue Cross.

When told the legislature could end her newfound coverage July 1, her jaw dropped. “At least I had my knee done,” she said.

Kaiser Health News is an editorially independent program of the Kaiser Family Foundation.

Comments
Show Comments

national

health-science

Most Read National