• Why aren’t more red states following Arkansas’s lead on Medicaid?

    One of this weekend’s worthwhile reads was Tyler Cowen’s NYT op-ed on the Affordable Care Act and the future of health reform.  On Medicaid, he offers this:

    One way forward would look like this: Federalize Medicaid, remove its obligations from state budgets altogether and gradually shift people from Medicaid into the health care exchanges and the network of federal insurance subsidies. One benefit would be that private insurance coverage brings better care access than Medicaid, which many doctors are reluctant to accept.

    Putting Medicaid beneficiaries into the exchanges? That sounds familiar. HHS recently green-lit a waiver proposal for Arkansas to do just that. For those of you unfamiliar with the “private option”, most newly-eligible Medicaid beneficiaries won’t receive Medicaid at all; they’ll be enrolled in silver plans on Arkansas’s exchange, with their premiums and cost-sharing subsidized by Medicaid funds (pre-expansion enrollees will stay in the public program).

    This was highly contentious when it emerged last spring, with concerns regarding the legal authority for CMS to funnel Medicaid funds into the exchanges (it’s there) and thorny questions about how Arkansas could possibly pull this off in a “budget neutral” fashion, conventionally understood as not exceeding the cost of traditional expansion.  This baffled observers—including me—because private reimbursement rates exceed Medicaid. That’s hard math to escape.

    CMS handled this by setting a cap on federal expenditures; overall, the cost of Arkansas’s Medicaid expansion can’t exceed about $6,000/year per new beneficiary.  If that seems a little generous, well, it probably is. As David Ramsey reported (emphasis added):

    Arkansas will probably not have much trouble staying under the caps and passing the budget neutrality test. That’s unlikely to quiet those who are skeptical of the state’s claim that this won’t cost more than traditional Medicaid expansion would have. That’s what a budget neutrality test is supposed to determine, but the feds are implicitly accepting the controversial theory from DHS that [Medicaid rates would need to be increased to match private rates in order for expansion to work]. The actuaries hired by DHS projected the per-person, per-month cost of a beneficiary under a traditional Medicaid expansion, then automatically raised the cost by 24 percent in order to make it the same as the actuarial projection for the per-person, per-month cost of a private plan. That’s an approach, and a theory, that some health care experts find less than convincing. But given how closely the caps from the feds track the projections from DHS, CMS is apparently on board.

    Bracketing feelings about fudgy math for a moment, this could easily be a model for states that have been intransigent about expanding their public programs. If conservatives really embrace the idea of shifting the Medicaid population into subsidized coverage on the exchanges, as Cowen seems to, this is a realistic step—albeit an incremental one—in that direction. 

    Obviously, the expansion model only fits part of Cowen’s recommendations. State-level efforts can’t federalize Medicaid—Arkansas limited the private option to their expansion population, because the state remains responsible for a greater share of costs with current beneficiaries, and the expense of also shifting that group into the exchanges is daunting. It also doesn’t address other reforms that Cowen proposes, which would need to be handled at the federal level (with all attendant politicking).

    But expanding Medicaid through the exchanges is achievable in the near term for the 26 states still opposed to expanding the public program (Iowa and Pennsylvania are exploring the option.).  As Ross Douthat points out, conservatives find fault in the new marketplaces, but they’re “closer to the right-of-center vision for health care reform than the Obamacare Medicaid expansion”.

    If red states see merit in expanding coverage through the private market—if this is truly the direction they would like to take the Medicaid program in the future—they should take a cue from Arkansas instead of denying coverage to millions of Americans.

    Adrianna (@onceuponA)

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    • Needed update, thanks.

      Still begs the question: red states have a big problem with current Medicaid eligible folks. If and when they join the ranks of their newer eligible brethren–if they all adopt an AK style plan–fed affordability a no go. We still need a long-term policy fix.

      Brad

    • On his blog, Cowan hedges a bit regarding his op/ed in the NYT. Among other things, he says: “I view my proposal as a third- or fourth-best exercise, it is neither first nor second best”. Cowan, who most describe as a libertarian, is not now nor has he ever been a supporter of ACA. That’s not to say that Cowan can’t have good ideas for improving ACA. Rather, it is to suggest that improving ACA is not Cowan’s first priority. Many years ago (almost 40) when I worked at a state legislature the term “friendly amendment” meant one that would vitiate the proposed legislation. Cowan’s “friendly amendment” should be viewed with similar skepticism.

    • I am in favor of anything that helps the poor and near poor in the stingy states………….

      but Tyler Cowen is a long way removed from any personal poverty. He ignores that fact that Medicaid has no premiums due, no deductibles, and no coinsurance.

      (rather like Canadian health care, actually.)

      But a Bronze plan on the exchange, while it might have no premiums, has huge deductibles and coinsurance once you get by the free preventive care.

      A poor person with a Bronze plan will be broke all over again if they have an actual illness or injury that is somewhat serious.

      • Adrianna said Silver, not Bronze, so that helps. Also, I think there is subsidized cost sharing for low income people, so that a Silver plan has much lower out of pocket costs for someone at 110% of FPL than for someone at 300% of FPL. Still, the beneficiaries will pay more than they do under Medicaid, and those extra costs are on top of the funny math with the alleged 24% increase in what the Feds are willing to pay.

        I really don’t understand the conservative argument here. First, Medicaid is bad because we’re broke and can’t afford to provide healthcare to everyone. Then, Medicaid is bad because it’s too cheap and doesn’t provide enough access to care. Are these two arguments being made by different people, and am I just lumping them together under the conservative label? Anyway, I’m at the point where I don’t care what it costs anymore. If we can’t get a new, efficient, and universal system due to politics, but we can get our stupid inefficient system to cover everyone, I’ll be happy. We can worry about cost once we’ve fixed access.

        • Well said, Brian, and I think you understand completely. Many of the anti-Medicaid arguments are not intended to produce a better Medicaid program, but simply to point out problems. It’s been noted many times on TIE, by myself and others, that the problem of low Medicaid provider payment (or Medicare, for that matter) is easily solved. Pay providers more. Of course, that raises costs.

          I’m with you. Let’s figure out how to get everybody covered in our dysfunctional system, then we’ll have to figure out how to make it function better. Because otherwise, we’re going to diddle around for another hundred years . . .

        • the conservative argument is always “government is the
          problem.”

      • “He ignores that fact that Medicaid has no premiums due, no deductibles, and no coinsurance.

        (rather like Canadian health care, actually.)”

        A minor correction…

        “Canadian” health care may have a premium due depending upon which province you live in, as each province’s plan is administered separately. (It’s only “Canadian” in terms of the federal regulations that dicate requirements, and federal oversight.)

        The premuims tend to be trivial compared to the US. For example, as a high income single person, my premiums are only $66.50/month, for what would likely be considered a Platinum/Cadillac plan (only better.) Often, because the premiums are so low, employers simply pay them as a benefit, along with offering extended health benefits (i.e. out of country, eyeglass coverage, etc.)

        Nevertheless you are correct in that there are no deductables or co-pays.

    • This solution completely ignores the impact that high cost sharing will have on the ability of low income individuals to access needed services. We are talking about people who will literally have to choose between medicine and food.

      Federal law currently limits co-pays for Medicaid beneficiaries at levels far below those of the exchange plans Medicare provides the QMB, SLBI and Qualified individual programs for low income seniors who need assistance with cost sharing.

      Unfortunately the exchanges were designed under the false premise that it is the extravagance of individuals that is the principal driver of health care inflation and needs to be curbed with co-pays and deductibles that can rise to over 20% of total family income.

    • How would cost-sharing be applied to low-income individuals in an Exchange setting? This paper discusses some of the unique features of Medicaid beneficiaries that have compelled the Federal government to limit the amount of cost-sharing state Medicaid programs may impose:

      “Medicaid, the nation’s public health insurance program for low-income people, now covers nearly 60 million Americans, including many working families, low-income elderly, and individuals with disabilities. Medicaid beneficiaries tend to be poorer and sicker than those enrolled in private insurance. Given these characteristics, federal law limits the extent to which states can charge premiums and cost-sharing, particularly for pregnant women, children and adults but allows flexibility for individuals with incomes above 100% of the federal poverty level.

      Over the years, Medicaid premiums and cost sharing have been used to limit state program costs, encourage more personal responsibility over health care choices and to better align public coverage with private coverage where states have expanded coverage. However, research shows that premiums and cost sharing can act as barriers to obtaining, maintaining and accessing health coverage and health care services, particularly for individuals with low-incomes and significant health care needs. State savings from cost-sharing and premiums may accrue due to declines in coverage and utilization more so than from increases in revenues. This brief reviews three key questions: What are the current rules about cost-sharing?; What is the status of premiums and cost-sharing in Medicaid today?; and What are the new proposed rules for premiums and cost-sharing?” http://kff.org/medicaid/issue-brief/premiums-and-cost-sharing-in-medicaid/

    • The idea of federalizing shared programs like Medicaid is a no-go with the GOP. If you are a conservative you want less Medicaid and lower taxes. Federalizing medicaid may or may not make it easier to make nation-wide cuts to the program, depending on the mood washington is in. But it will definitely require higher federal taxes while at the same time freeing up revenues in state budgets that will inevitably be used at least in part to expand state governments. Hence, federalizing Medicaid simply amounts to raising taxes and growing government.

      Another way to put this is that the conservative strategy over the past half-century has been to push as much of the federal government onto the state budgets as possible, in order to prevent states from being able to do anything else. That way, they can effectively constrain the size entire US government apparatus from a single branch of government in which it is exceedingly easy to obstruct majority efforts.

    • My big question about Arkansas is, how will the lower income pool interact with network restrictions? Normally, those restrictions function by imposing higher deductibles or cost sharing on patients when they go out of network. If the very poor (about half the group makes less than 50% FPL) have their cost sharing covered by the government, what incentive do they have to stay in network?

      The standard insurance market historically dealt with people who work or could get through the individual application process. How will that market handle the very poor population, which I’d guess has much higher incidence of things like housing insecurity, language barriers, illiteracy and so on?

    • As a resident of a red state (Oklahoma), I think the most obvious solution is that many state legislators elected in the past few cycles have run on an anti-Obamacare platform. A vote for the Arkansas Plan would be a vote to expand Medicaid and would therefore be construed as a vote “for” Obamacare.

      State legislators, like Congressmen, are wary of primary challenges and will let their own political ambitions cloud their judgement about responsible governing.