KHI News Service

The Arkansas Medicaid Model: What you need to know about the ‘private option’

By Jay Hancock | May 02, 2013

The Obama administration wanted Republican states to accept the health law's Medicaid expansion pretty much as is. Republicans wanted Medicaid money in no-strings block grants.

Arkansas has broached what could be a deal-making compromise, giving Washington the increased coverage for the poor it wants and Republicans something that looks less like government and more like business.

Florida, Nebraska and other Republican-heavy states have taken a look. Some think the Arkansas model, passed by a Republican legislature and signed by Democratic Gov. Mike Beebe last week, could erode resistance in some 30 red states and eventually prompt similar programs elsewhere. And because the federal government has put no deadlines on Medicaid expansion, other states will be able to watch what happens in Arkansas and see if they want to adopt a similar idea.

While the plan brings what many see as advantages for patients, it also raises difficult questions of cost and implementation. KHN reporter Jay Hancock talked to experts to learn the implications for consumers and taxpayers.

Q: What’s the Medicaid expansion and what is the Arkansas plan?

A: Expanding the Medicaid program accounted for more than half of the 30 million or so uninsured people who were supposed gain coverage through the Affordable Care Act. The Supreme Court's decision making Medicaid expansion optional, combined with red-state reluctance, have reduced chances of reaching the coverage targets.

Arkansas would let newly eligible Medicaid beneficiaries shop for insurance policies along with other consumers in the online marketplaces, also known as exchanges, created by the health law. Arkansas House Speaker Davy Carter, a Republican, called the idea "a conservative alternative to the policy forced upon us by the federal government."

Q: How is the Arkansas proposal different from traditional Medicaid?

A: Medicaid is a combined federal and state program for low-income and disabled people that for many years paid health care providers for each procedure as well as each doctor and hospital visit. Recently most Medicaid treatment has shifted to managed-care plans run by private insurance companies with incentives to keep costs down. Arkansas takes the privatization idea a step further by letting many Medicaid consumers shop for the same commercial insurance available to those who aren’t eligible for the program.

"The menu of options is going to look the same" for eligible Medicaid consumers as for anybody else buying through the online marketplaces, said Matt Salo, executive director of the National Association of Medicaid Directors. "Access to physicians is going to look the same."

Q: What are the advantages?

Commercial insurers' doctor networks are generally wider than Medicaid networks. Entrée for Medicaid patients could improve access to care and prevent minor illnesses from spiraling into expensive hospitalizations.

It could also reduce care disruptions for those whose incomes fluctuate, shifting them between Medicaid and the subsidized exchanges.

At the same time, adding thousands of Medicaid members to the exchanges could reduce the risk that a few chronically ill patients would sharply drive up exchange premiums. With proper software, exchanges could determine people’s eligibility for Medicaid and pay federal and state Medicaid dollars directly to their insurance plans.

Q: Will the Arkansas model automatically be implemented?

A: No. The Department of Health and Human Services has said it will consider "a limited number" of Arkansas-style plans in which Medicaid beneficiaries would use federal dollars to buy private policies. Arkansas must give HHS a detailed proposal. A federal green light is no sure thing, given the plan's departure from traditional practice and a requirement that it be cost effective. "We haven't approved anything," Marilyn Tavenner, acting administrator of HHS’s Centers for Medicare and Medicaid Services, said at a confirmation hearing in April.

Q: What are the disadvantages?

A: Cost might be a big one. Medicaid typically pays hospitals and doctors much less than average. A beneficiary costing the government $6,000 a year for Medicaid would cost $9,000 on a private plan on the exchange, the Congressional Budget Office has estimated. On the other hand, Arkansas officials have suggested that competition among insurers and providers for Medicaid patients could keep the cost from being prohibitive or even save money eventually.

There would also be challenges to harmonizing Medicaid plan designs with those of policies sold on the exchanges. Private coverage on the exchanges is expected to come with large deductibles and co-payments for consumers, but Medicaid strictly limits such cost sharing.

For a Medicaid patient, "if you’re going to go to the pharmacy counter and pick up your prescription, are you going to have to come up with this 15 or 20 percent copay out of your pocket?" said MaryBeth Musumeci, a senior analyst at the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured. (Kaiser Health News is an editorially independent program of the foundation.)

Q: Would all Arkansas Medicaid members be able to shop on the exchanges?

A: No. The law would keep most of Arkansas' existing Medicaid beneficiaries -- mainly children -- in the state's regular Medicaid program. To avoid potential cost shocks to the exchanges, the very sickest of patients in the Medicaid expansion would also be placed in traditional Medicaid.

Kaiser Health News (KHN) is a nonprofit news organization committed to in-depth coverage of health care policy and politics. The Washington, D.C.-based news service is a partner of KHI News Service.

KHI News Service coverage of Medicaid expansion

Medicaid Access Coalition launches online "ticker" showing foregone federal dollars (2/13/14)
→ KHI report: Nearly 182,000 Kansans in the ‘Eligibility Gap’ (1/11/14)
House speaker says Medicaid expansion is "up to the governor" (1/10/14)
KS Senate president says Medicaid expansion unlikely to gain approval this session (1/7/14)
Profiles of the coverage gap: Kathleen Christian (1/6/14)
Efforts continue to expand Medicaid in Kansas and Missouri (1/6/14)
Hospital association hires former Bush HHS secretary to help craft a plan Kansas Republicans might support (12/23/13)
Iowa wins approval to expand Medicaid by using federal funds to buy private insurance (12/11/13)
White House officials hold call to urge Medicaid expansion in Kansas (11/21/13)
Republican governor talks up plan to expand Medicaid — his way (10/28/13)
Challenger says Brownback owes voters a decision on Medicaid expansion (10/22/13)
Nearly 5.2M Americans fall in coverage gap in states not expanding Medicaid (10/16/13)
Sebelius: Feds flexible on how states expand Medicaid (9/22/13)
Sebelius says Kansas and Missouri are missing the boat on Medicaid expansion (9/20/13)
Medicaid expansion coalition finds strength in numbers (9/17/13)
Republican Gov. Corbett proposes expanding Pennsylvania Medicaid (9/16/13)
Kansas lawmakers urged to consider Medicaid expansion by Wesley CEO (8/29/13)
Estimating maneuver could help more people gain from Obamacare: How the poor might qualify for Affordable Care Act subsidies in states that don't expand Medicaid (8/12/13)
Report: States not expanding Medicaid stand to benefit most from doing so (7/18/13)
CMS won’t penalize hospitals in states slow to expand Medicaid (5/14/13)
Insurer Centene: We can do Arkansas-style Medicaid (5/14/13)
The Arkansas Medicaid Model: What you need to know about the 'private option' (5/2/13)
Nothing to be done about coverage gap in states not expanding Medicaid, feds say (4/29/13)
Brownback says he's listening to Medicaid expansion proponents, opponents (4/5/13)
Oregon shows costs of putting Medicaid enrollees in private coverage (3/29/13)
Governor urged to expand Medicaid eligibility (3/27/13)
Arkansas Medicaid expansion attracts other states' interest (3/26/13)
Senate president prefers options remain open on Medicaid expansion (3/25/13)
States urged to expand Medicaid with private insurance (3/22/13)
Senate budget amendment underscores opposition to Medicaid expansion (3/21/13)
Study: Kansas employers face millions a year in possible penalties without Medicaid expansion (3/15/13)
More than 30 Kansas groups pushing for Medicaid expansion (3/12/13)
Health insurers see big opportunities in health law’s Medicaid expansion (3/8/13)
Medicaid expansion supporters to step up lobbying efforts (3/7/13)
Budget committee hears resolution opposing Medicaid expansion (2/22/13)
Legislators focusing on Medicaid expansion cost estimates (2/19/13)
Kansas hospital group study predicts expanding Medicaid would generate 4,000 jobs (2/18/13)
Brownback officials release their cost projections for Medicaid expansion (2/8/13)
Medicaid expansion bill introduced (1/22/13)
Kansas hospitals worried about loss of dollars for charity care (1/14/13)
Brownback compiling own estimate of Medicaid expansion cost (12/20/12)
Group urges Brownback to expand Medicaid eligibility (11/9/12)
Debate begins on possible Kansas Medicaid expansion (10/25/12)
Amerigroup CEO says states ‘need’ to go along with Medicaid expansion (7/11/12)
Kansas hospitals ready to get on with federal health reform, spokesman says (7/2/12)
Kansas AG claims partial victory in health reform case (6/29/12)
High court upholds Affordable Care Act, but ruling puts limits on Medicaid expansion (6/28/12)

→ Kansas Hospital Association: An opportunity for the Kansas Medicaid program
→ Americans for Prosperity-Kansas: Well-intentioned policies do more harm than good
→ Health Reform Resource Project: The cost of not expanding Medicaid
→ Rep. Jim Ward: Medicaid expansion essential for healthier Kansas
→ Rep. David Crum: Reasons for opposing Medicaid expansion
→ National Academy for State Health Policy: Much ado about Arkansas: Medicaid in the insurance exchange

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