By Timothy Costa, Buchanan Government Relations Professional
Earlier this week, after a contentious legislative debate, the Arkansas legislature approved a plan to expand Medicaid but did so by pushing the expansion population into the Health Insurance Exchange (HIX). There has been much focus on Arkansas since the state’s governor, Mike Beebe, met with HHS Secretary Sebelius in February and announced a deal to expand health insurance coverage for low-income persons by using a vehicle other than Medicaid.
So what happened? At this point, there is a vague commitment from the federal government (which has to approve just about everything before a state can implement) to work out an arrangement whereby the would-be Medicaid expansion population receives coverage through so-called “private plans.” But the federal government added a caveat when it released guidance to Arkansas and other states about what the private option would look like. CMS said the private plans must be equivalent to Medicaid in the benefits it provides, cost-sharing limitations, beneficiary protections, including appeal rights, and so on. Arkansas touts its private option as something new and something bold. The federal government, when you cut through the window dressing and actually read the specifics, says it’s Medicaid. Who is correct?
It’s certainly true, despite the legislature’s desire that it be otherwise (just read the language of the bill http://goo.gl/ijzAx) that the federal government has the leverage when it comes to negotiating changes to Medicaid. Simply put, states have to seek federal approval for just about any change to their Medicaid programs. That’s just the way it works. Is it possible that Arkansas has a verbal agreement from the federal government to change the Medicaid program in a manner that the same federal government reiterated in its guidance to Arkansas is not permissible? Perhaps, but it’s unlikely.
The legislation that Governor Beebe is going to sign into law on Monday reads in part:
(2) The Health Care Independence Act of 2013 shall ensure that:
(A) Private health care options increase and government-operated programs such as Medicaid decrease; and
(B) Decisions about the design, operation and implementation of this option, including cost, remain within the purview of the State of Arkansas and not with Washington, D.C.
Arkansas says under its government-operated program such a Medicaid program will “decrease,” but its Medicaid spending will necessarily increase. Pennsylvania has had tremendous success is providing coverage to millions of low-income people through the managed care program called HealthChoices. One could argue that Pennsylvania already does what Arkansas wants to do – cover people through private insurance – but the Medicaid budget still goes up every year because the HealthChoices program is only permitted under a Medicaid waiver. Whether done through the Medicaid Fee-for-Service program or Managed Care or other plans on the Exchange, if it’s Medicaid money and must adhere to all Medicaid rules, then it’s Medicaid.
“Decisions about the design, operation and implementation” reside in Arkansas and not Washington, DC. Every state would likely jump at this offer…if it’s true. Unfortunately, just saying something doesn’t make it so. Medicaid 1115 Waivers necessarily entail negotiation with the federal government. More importantly, no deal is done until it has the imprimatur of federal officials. The legislature obviously envisioned some type of negotiation or it wouldn’t have inserted language that reads, “If the Department of Human Services does not receive the necessary federal approvals, the program shall not be implemented.” Again, if the feds are willing to negotiate away their ability to run the program, states would be well advised to take such a deal, but federal guidance to Arkansas clearly states they didn’t and they won’t.
Medicaid is a complex program for many reasons – one being that it is an entitlement program. But Arkansas proposes a fix here, too. The legislation states:
(i) An eligible individual enrolled in the program shall affirmatively acknowledge that:
(1) The program is not a perpetual federal or state right or a guaranteed entitlement;
(2) The program is subject to cancellation upon appropriate notice; and
(3) The program is not an entitlement program.
If, in addition to negotiating away federal control of Medicaid, Arkansas is able to get the federal government to agree that Medicaid is not an entitlement program, every state currently weighing the decision as to whether or not to expand would likely jump on board and take the Arkansas deal. It would free up states to design and innovate in ways currently not allowed by the federal government while limiting the ability of advocates, beneficiaries and others to use the judicial system to prevent change.
Lastly, there has been an ongoing debate in Arkansas about whether or not it’s more expensive to cover people through Exchanges as opposed to traditional Medicaid. Advocates for the legislature’s proposal argue that commercial and Exchange plans will provide higher reimbursements to hospitals, doctors and other providers, thus ensuring access as said providers will be more willing to see Medicaid (or in this case non-Medicaid?) beneficiaries. It’s true that Medicaid reimbursements are usually very low compared to both commercial payers and Medicare. But if you raise provider payments (which may be necessary in Arkansas, Pennsylvania and any other state that wishes to expand coverage to many people) the cost of the program necessarily increases.
If Pennsylvania were to expand Medicaid, it could use the Exchange as opposed to the existing HealthChoices program to provide that coverage, but absent significant amounts of creativity, the commonwealth’s taxpayers will shell out more money to cover the same group of people. It’s not a mystery. If the current program pays providers “X” and the new program pays providers “X+Y” the cost of the program goes up. So when the federal money starts to slip, the Commonwealth will be paying 10% of some higher number, therefore costing more money.
The unfolding Arkansas drama has been of interest to a number of states. But the state and its federal partner, CMS, seem to be heading very different places. The state passed legislation that says if the feds relinquish control of Medicaid and end the entitlement, it will expand the program by not expanding the program by putting people into private coverage. At the same time, the federal government says it supports the Arkansas private coverage option, but coverage, cost-sharing, beneficiary protections and rights, overall cost, etc. have to be the same as Medicaid. So when Governor Beebe signs the legislation into law amidst a bunch of fanfare from the choir, someone should ask, “What does it all mean?” It appears it could only mean one of two things: (1) Arkansas does nothing because the feds wouldn’t agree to the proposed terms; or (2) Arkansas expands Medicaid in a way that makes the program more costly and a bigger burden to taxpayers than it would have been otherwise.