Arkansas has a strange Medicaid expansion. Instead of expanding Medicaid or tweaking their Medicaid program for newly eligible people, they sent everyone to the Exchange to buy special Silver plans with cost sharing assistance. This was needed to get the plan out of the conservative legislature as there was no way a government program could ever do anyone any good, good only comes from the Free Market ™.
The Arkansas model works. It does provide health insurance to 220,000 to 250,000 people. It is also the most expensive way to do Medicaid expansion as the private carriers (mainly Blue Cross/Blue Shield) are paying their providers full commercial rates. Medicaid pays significantly less than commercial rates. Medicare pays more than Medicaid but less than commercial.
Arkansas has been able to get away with this as the Federal Government is picking up the entire tab. However, starting on 1/1/17, the state of Arkansas will need to kick in some money to cover Expansion. Once the state has to kick in money, the private option looks far less attractive.
As federal contributions decline, the state will need to find $50 to $60 million in general revenue to continue the program. But that’s nothing compared to the hit Arkansas would take if it opted out of expansion. “If you end Medicaid expansion, you’re going to be taking $1.4 to $1.7 billion out of our state’s economy,” Hutchinson said.
Arkansas is looking for cost savings, and there were seven groups of proposals. The fifth one is the most interesting:
5. Limit access to private plans to working people. This might be the most significant suggestion and also the weirdest. Hutchinson suggested establishing a certain income line as a cutoff for the private option (that is, Medicaid-funded private insurance); below that income line, we’d put people on traditional Medicaid. He said this would result in significant cost savings. (In that case, might it not be be better to go with traditional Medicaid for everyone below 138 percent of the poverty line, as originally envisioned by the ACA?)
The grifting way is to shift the sick(er) people who are high utilizers of medical services from the private option/Exchange risk pools to the far cheaper Medicaid payment pool. This improves the health of the Exchange risk pool, and makes using the Exchange far cheaper as the high cost utilizers are out of the picture. This still shovels some money to Holy Private Enterprise while reducing state expenditures.
The better way is to shift everyone back to Medicaid, and pay Medicare rates for Medicaid if there is a concern that paying Medicaid rates will lead to a super-narrow network that is not legally or morally defensible.
Right now the conservative state modifications to Medicaid have been paid for entirely by the Federal government. The Obama Administration has been very flexible on waivers for two reasons. The first is a moral reason — Medicaid expansion, even bastardized expansion is far better for the more vulnerable than nothing. Secondly, kicking people off of benefits who are currently receiving benefits is tough, it is an entrenching tool. However, in the next sixteen months, the states will have to start paying a little bit, and the expensive experiments to create Medicaid expansion without calling it Obamacare will start to bite. $10, $20, $30 million dollar state tabs for performance art will start getting expensive when a cheaper and just as effective option of traditional Medicaid expansion is available.