Maybe the Medicaid expansion "private option" is legal but it sure looks fishy | Arkansas Blog

Maybe the Medicaid expansion "private option" is legal but it sure looks fishy

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When you ask state officials and lawmakers about the legality of the “private option” alternative to Medicaid, you always hear the same thing. Whether it’s the governor, legislators, DHS or the Surgeon General, they’ll say 1) ain’t our fish to fry and 2) the U.S. Department of Health and Human Services has awfully good lawyers, we’ll trust them.

And fair enough. If there’s a legal issue, that’s on HHS, not Arkansas. (State officials have also told me that they have been given no directives or pressure about cost, or cost as compared to Medicaid.)

But that still leaves us wondering about it, especially since HHS won’t comment substantively on the record and rumors are mounting that other states will be joining Arkansas in the experiment.

We have a lot more information since we first asked this question. Sarah Kliff at the Washington Post explained that the plan was not dependent on a waiver but on an obscure, little-used provision of the Social Security Act. This was actually mentioned in the HHS letter explaining state options back in December, which suggested premium assistance to buy private insurance on the exchange for the expansion pool under some specific, limited circumstances — though with the caveat that "premium assistance options in Medicaid…are subject to federal standards related to wrap around benefits, cost sharing and cost effectiveness."

The folks at Project Millennial** asked the question that still nagged at me after Kliff's explainer. If you use this handy trick to offer Medicaid via private insurance, we know that the same standards in terms of coverage apply. Doesn't the private plan also need to be "comparable to the cost of providing direct coverage under the state plan"?

Health law expert Sara Rosenbaum, who told the D-G that the "private option" was legally solid, explained in detail how the approach would operate within the bounds of the law. But she raised a lot of unanswered questions, including a giant one: "How will CMS calculate whether the 'comparable' test noted in its proposed rule will be met? Is a 50% greater premium 'comparable'?" In a followup interview with Kliff, she says that "it just says 'comparable' so there's a lot of latitude." As far as I can tell, the Centers for Medicaid and Medicare services would police themselves on this point.

The "private option" will almost certainly cost more, probably by quite a bit. In response to this, Rosenbaum does some vague hand-waving. She mentions savings from churn but makes no claim that that would make up a 50 percent difference. And she suggests that the expansion pool is healthier and less risky than generally assumed. Maybe so, but that would be a cost savings either way — it doesn't change the relative difference between a public and private approach.

In fact, Rosenbaum herself told the National Journal that Congress specifically rejected a "private option"-style approach because of cost concerns, which amounted to extra tens of billions of dollars. "Here we are now with the secretary having resurrected a 25-year-old provision of the law to allow states to do what Congress considered and then informally rejected because of cost,” Rosenbaum said.

Of course, if the "private option" will somehow magically be revenue neutral even though we'll be using companies with higher reimbursement rates than Medicaid, none of this is a problem. That would change everything. But I haven't seen anyone even try to make a plausible claim that this approach is not more expensive.

Legal experts are saying that there is nothing to worry about here, though of course they have assured us that there was nothing to worry about before! I'm not a lawyer and I suppose we'll see.

But if you ask me, the political optics here look awful. This gets to why, if I had to guess, HHS is not so eager to comment. Let’s assume that there are sound legal reasons that the "cost comparable" test is extremely broad. The implication is that the executive branch has incredible spending flexibility. Obviously there is wide latitude under existing law for HHS to take a “different ways to skin a cat” approach to implementing the ACA. But more expensive ways to skin a cat? More expensive by hundreds of millions of dollars a year in a cheap, small state? Which probably means billions a year in other states?

I can imagine both liberals or conservatives arguing that this was an executive-branch grab of the power of the purse. Are there any limits to “comparable”? 75 percent more? Twice as much? Five times as much? Even if you think expanding coverage is a worthy goal, you might start to get squeamish. Imagine a similar scenario in, say, the Department of Defense, using more expensive private contractors.

Remember, Congress appropriated the funds for these high Medicaid match rates with the intention of expanding coverage via, well, Medicaid. That’s what the CBO scored. Even if it's perfectly legal, this more-expensive workaround seems awfully fishy.

**Tangent: I spread the word about it on twitter already, but that post from Project Millennial is outstanding, not just on legal questions but on cost, politics, and more. Anyone interested in this debate should read it, and follow that blog. In fact, the Republican leadership printed and handed out copies of the post to members, even though they refer to them as "a couple of liberal grad students." Also, my wife liked that post because it did a lot work that I would have been stuck doing on my own, so I kept up with the dishes better. Thank you Project Millennial! Here's a recent followup they did.


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