The Arkansas way

The state of Arkansas will move forward with a plan to expand Medicaid, except that it’s not really Medicaid even though it will cover all of the Medicaid-eligible population. Here’s the explanation.

It’s constitutional – deal with it

Gov. Mike Beebe met with about twenty lawmakers this afternoon to announce the results of his meeting with Sec. Kathleen Sebelius last Friday.

The feds have given Arkansas permission to pursue a plan that would provide private health insurance to anyone between 0-138 percent of the federal poverty level, giving coverage to more than 200,000 of the currently uninsured. The government would pay for the entirety of the premium, though consumers might be subject to some co-pays.

Beebe brought questions and ideas from legislators to his meeting with Sebelius and “basically they’ve agreed to give us about everything we’ve asked for,” he said. “What that really amounts to is take the Medicaid population that would be expanded…and use those federal Medicaid dollars and purchase insurance through the exchange. So they would buy private insurance through the exchange for the entire population, and [the feds have] given us permission to do that.”

This isn’t “partial expansion.” The full pool of folks that would gain coverage under full expansion of Medicaid would still get it. But Arkansas is the first state to publicly get a deal that accomplishes this not via the Medicaid program but via the exchange (Florida will be allowed to send some Medicaid recipients to private insurance through their managed care system).

Just as with Medicaid expansion, the feds would foot the entire bill for the first three years. Thereafter, the state would have to start kicking in a little bit, eventually settling at 10 percent in 2020. (Technically, these are Medicaid dollars, but they would be flowing to private companies and consumers would be interacting with private companies, not with the Medicaid program.)

Such a deal would potentially be a windfall for insurance companies, as well as hospitals, who would likely see higher reimbursements from private insurance on the exchange. For low-income citizens without health insurance, the deal would be similar to expansion, they would just get private insurance instead of Medicaid.

Gov. Beebe also announced that, prompted by strong support from House Speaker Davy Carter, the state will likely use the “sunset provision” idea from Florida, which would require the legislature to re-approve the deal in three years time, after the full federal match rates run out. States are already allowed to opt in or opt out at any time, but Beebe got approval from Sebelius on the sunset idea as well, just in case. Carter told reporters that a sunset was a prerequisite to any deal.

As for costs, buying private insurance for citizens is likely more expensive than providing Medicaid. That almost certainly means that this deal will have a higher price tag for the feds. And it could mean higher costs for Arkansas once the state has to start chipping in. Beebe acknowledged that possibility but said the sunset will allow lawmakers to analyze the question with hard data in three years time.


Beebe did not offer an opinion on whether this approach was better than simply expanding Medicaid. One way or the other, he believes accepting federal money to cover the uninsured is a good deal and his focus now is on closing the deal.

“My main objective is to make this legislature as comfortable as I can make them,” he said. “With a three fourths vote requirement in both houses, that’s a steep, steep burden….If the majority would prefer to go this way to get this done, I’m happy with that. If they want to go the other way, I live with that as well. The cost to the taxpayer for the first three years in the state of Arkansas is going to be the same.”

Beebe said that for some legislators, subsidizing folks to buy private insurance was preferable to directly covering people through a government program for “philosophical” reasons.

Let’s pause for a second to consider that last paragraph. I’m writing about this story because the main objection to Medicaid expansion here in Texas is the oft-stated belief that “Medicaid is broken”, seen most recently here. I don’t particularly agree with that statement, but I’m not the majority in the Legislature. But whatever you think about this solution, it completely addresses that concern. The federal Medicaid funds would be used to buy private insurance through the insurance exchange instead. Don’t want to expand Medicaid because you think Medicaid doesn’t work? Fine, here’s a way to serve the vast uninsured population that doesn’t use Medicaid? What’s your objection to that?

Now, just because I think this is an interesting option doesn’t mean I think it’s awesome. Ed Kilgore points out the obvious:

So let’s be clear: using the exchanges will be more expensive, and perhaps less generous to beneficiaries, than traditional Medicaid, but because Republicans prefer private insurers for “philosophical reasons”.


This draws attention to two pretty important national issues: the first is the persistent gap between the faith conservatives place in the “efficiency” of private-sector health insurance and all the available evidence. And the second is the emerging long-term conservative strategy of undermining Obamacare by limiting its “public” elements as much as possible and then chipping away at the regulations that make it available and the subsidies that make it affordable. This is precisely what Douglas Holtz-Eakin and Avik Roy called for in their much-discussed recent op-ed on how conservatives should adjust to the enactment of Obamacare.

Note that providing coverage by this method will ultimately be more expensive to Arkansas as well, once the federal subsidy drops to 90%. The potential for states like Arkansas, Florida, and Texas if they go a similar route to drop the expansion at that time is sure to be a thorny issue down the line. Still, there is some upside to this, as Kevin Drum observes.

I’m a little more willing to wait and see how it works out. In particular, I happen to think this may solve a legitimate problem. Here’s the tail end of [that article in the Arkansas Times]:

Department of Human Services Director John Selig speculated that things would actually run more smoothly. “The most difficult part of the exchange was going to be people going from Medicaid to private insurance, back and forth as they went up and down [the] income line,” he said. “Now, you just keep [the private insurance company] as you go up or down. In a lot of ways this simplifies what happens on the exchange.”

This really is an issue with the Medicaid expansion, and it’s a well known one. If you’re at 130 percent of the poverty level this year, you qualify for Medicaid. If you get a raise and go up to 140 percent next year, you no longer qualify and instead have to navigate the exchanges. If your hours are cut back and you fall to 130 percent again the year after that, it’s back to Medicaid.

How big a deal is this? That’s hard to say. But it’s not a made-up issue, and it’s possible that the Arkansas approach could legitimately be better. What’s more, I’m OK with allowing states to experiment within limits. It’s the only way to find out whether or not the exchanges really are more expensive, and whether or not the Medicaid ping-pong really is a serious problem. The ideology behind this decision might be misguided, but there’s a good chance we’ll get some useful data out of it regardless.

If the Republicans are willing to consider this, I’m willing to see how it goes, too. Providing the coverage to those who don’t have it is Goal #1. If a minor sacrifice has to be made at the altar of ideology in order to achieve that goal, fine. For all of the background chatter about the possibility of a “deal” on Medicaid expansion, predicated on the federal government willing to be flexible, it should be clear by now that the feds will be flexible if the objective of covering the uninsured population is met. Florida, Ohio, and now Arkansas have all found ways to make deals with the feds. As it happens, there is now a Republican “plan” for expanding health care access, but it’s pretty darned skimpy, and even more ideologically driven.

[State Sen. Bob] Deuell said he was considering a plan that would have Texas request a waiver from Medicaid officials in Washington. The request would include asking for $50 billion over 10 years, which is about half the funding the state would otherwise get from Washington over that period to expand Medicaid under the Affordable Care Act.

The state then would use that $50 billion to cover the roughly one million Texans who don’t get Medicaid today but could if the state expanded it up to 138 percent of poverty. (138 percent of poverty equals about $31,000 for a family of four.) The state would give those one million folks the equivalent of what they otherwise would get from Medicaid, which he says is $4,800 per person in Texas.

I admit this is technical, but bear with me for a few more details:

Recipients could use that $4,800 to purchase private insurance, buy into the state health plan that legislators like Deuell use or buy into the state’s Medicaid plan. As part of this waiver, he said, the state would set up health exchanges that would allow the eligible population to shop for health insurance.

Here’s more on the Deuell concept – it’s not really developed enough to be called a “plan”.

[Deuell would] force everyone who benefits to work, even if it’s volunteer work, unless they’re disabled or stay at home parents or caretakers of the disabled. He’d force hospital districts to cut their property tax rates; and health care providers and insurers, their charges and premiums, once more of the 6 million uninsured Texans got private insurance coverage, thereby squeezing down uncompensated care. He’d force all new recipients to be “locked in” to a primary care physician — such as himself. That doc would serve as gatekeeper, and would have to flash the green light before the newly insured people could tap into care from other providers. Children now on government health care would be wrapped into new, family coverage policies. Low-income people with high deductible coverage, and who “act as if they’re uninsured,” would be able to apply the subsidies to their copays and deductibles. And Deuell would encourage healthier lifestyles by charging newly covered Texans more if they smoke or are obese.

His four-page letter, though, is more of a sketch than a blueprint. He speaks of how Texas should negotiate with the feds to use the block grant money to “form group or individual policies in conjunction with insurance companies and/or a health system. The recent joint venture of the Baylor system and Scott & White comes to mind.” But no matter how he and others debunk the federal law’s exchanges, his federal counterparts’ conservative template blithely says there will be “guaranteed access and minimum benefit standards” in the non-Obamacare exchanges. And that requires some serious regulation of health insurers, which critics say has not exactly been a Texas bragging point. (For the blithe reference, see question No. 5 on this Paul Ryan FAQ sheet.)

The “exchange” in question is modeled on the Coburn/Ryan “Patient’s Choice Act”, because of course we can’t have the taint of anything Obama-related in Texas. I see this as pretty much a non-starter, since block grants aren’t going to happen and it’s clear that maximizing coverage is not a priority. I give Deuell partial credit for at least coming up with something, however half-baked and impractical, though I will point out again that Deuell has been in office since 2003, which is to say for as long as the Republicans have had complete control of state government, and this is only being proposed just now, because the Republicans have been embarrassed by a Democratic President they hate. It’s something, in the sense that it’s not nothing, but it’s not any more than that. Call me back when they really mean it. Wonkblog has more.


“From the standpoint of looking at how Texas could possibly expand coverage for this group of individuals, it fits very well with what my philosophy is,” said State Rep. John Zerwas, R-Simonton, an anesthesiologist and former hospital executive who called the plan a “private sector remedy.”

“I don’t know if it’s something the governor would particularly smile upon,” he added, “but certainly from my perspective this would be something worth looking at.”

It’s a start.

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