The case for private option Medicaid expansion | Arkansas Blog

The case for private option Medicaid expansion




Republican Rep. Charlie Collins of Fayetteville has put together an analysis of the legislature's great pending issue — whether to take advantage of the Medicaid expansion provided by Obamacare through a "private option" expansion of government-financed private insurance coverage. Several Republicans have decided it's the best solution under prevailing circumstances, but it's unclear whether a sufficient number can be enlisted to give the proposal the 75 votes it needs in the House for approval of appropriation bills.

Collins is sending the analysis to all who ask. Legislators will have a public session on the idea at 5 p.m. today and key votes could happen Thursday and Friday. Democrats are on board and working for the pending proposal. At the major sessions on the idea to date, the questions have come almost exclusively from committed opponents or those still sitting on the fence.

PS: Arkansas Advocates for Children and Families notes that the private option would be good for veterans.

Collins analysis follows (he also provided the chart above and another that follows):


The note below and attachments are my first DRAFT of a comparison of the choices in front of us. They lay out my analysis and assessment of the direction. I am sending to you for input/feedback, since I know this is incomplete, not 100% cooked, etc. Please review and email back your questions/input. Feel free to share with others for their input. Thanks for your time and help.

A Brief History of Obamacare

In 1964 Ronald Reagan stated in a speech to the Republican National Convention that liberals would always fight hard to implement socialized medicine in the United States. Conservatives have warned of a single payer government run healthcare program for decades. Variants of these health care systems exist in other western democracies. After stunning victories in US national elections in 2006 and 2008, Democrats achieved the Golden Trifecta of American power: 1. President of the Executive branch, 2. Majority of the House and 3. The most difficult element to achieve, a filibuster proof majority of the Senate (60 of 100 members). With this power they crafted a healthcare plan that would essentially move the US into a single provider/payer healthcare system (for ease of argument, I claim the goal is 100% of people on something like the Medicaid program). Democrat Senators in red states pushed back on complete government control, forcing the administration to create a dual pronged program, now known as the Affordable Care Act (ACA) or Obamacare. These Senators refused to accept Medicaid for all, and insisted a Private exchange market also be a part of the plan. The liberals relented to this compromise in order to get the 60 votes needed and ACA was born with both the private exchange and expanded Medicaid elements.

This program is such a significant change to America that the backlash was quick and strong. In a special election, the Democrats lost their 60th Senator (MA seat went Republican). In her 2010 primary AR Senator Lincoln faced $10 million in out of state money from the left, furious that she would not agree to a plan like Medicaid for all. Reaping historic gains, Republicans took a majority in the House in 2010. State legislatures also turned more red. Lawsuits were filed challenging Obamacare and in a landmark decision, the Supreme Court ruled Obamacare constitutional. However they also ruled that the Feds could not take away existing Medicaid dollars if a state refused new Medicaid expansion. Then conservatives mounted up for the 2012 elections, but fell well short of victory, losing the Presidency again, 5 seats in the Senate and 8 seats in the House. But the bright spot was Republicans continued to gain in some statehouses, including winning majorities in Arkansas (solidly in the Senate, barely in the House).

Bottom line is that with power make up in Washington it is clear Obamacare will not be overturned or repealed in the near term and Obamacre will be implemented beginning January 2014. Obamacare is here now. However with the opening for negotiation created by the Supreme Court and the movement of state legislatures, we have an opportunity to bring to life the vision of our founding fathers who believed that the States would be the innovative laboratories and solution centers for the country. They believed that the states would create solutions and those solutions would spread across the country as the results proved superior to alternatives. Now that we have fought at the federal level until the battle there is at a standstill, we now have to win the fight at the state level. We have to decide how to minimize the bad impacts of Obamacare while creating the future direction of US Healthcare.

Discussion of the only two options available

Obamacare mandates the following changes beginning in 2014 (among others); collection of about $500 billion in new taxes and savings of about $600+ billion by reducing existing healthcare reimbursement levels (primarily to Medicare) over 10 years nationally. Arkansas share of this new cost is about $1.18 billion per year (about $500 million in new federal taxes and $600+ million in federal spending reductions).

Under the Obamacare do nothing implementation option, about $204 million per year on average will come out of Arkansas hospitals (per AR hospital Assoc 3/13). Further, Obamacare do nothing implementation increases the Medicaid rolls by tens of thousands of people through ending the wood work effect (bringing qualified people who have not signed up onto the program) and increased spending through regulations on existing Medicaid beneficiaries. The total of these two costs to Arkansas state budget is $110 million per year (Optimus actuarial analysis 3/13). Obamacre also mandates an insurance exchange where workers at certain income levels will receive subsidies to purchase private insurance. There are NO reforms allowed to the Medicaid program under Obamacare rules, waivers must be obtained to pursue an alternative course. The total incremental cost on average beginning in 2014 to Arkansas hospitals and state government with the Obamacre do nothing implementation plan are $300+ million per year ($204 million hospital + $110 million increased Medicaid costs). The ability to modify, improve, adjust or otherwise experiment to create a different healthcare approach is extremely limited. The Medicaid roles grow from today, the insurance exchange is created and is expected to have several hundred thousand employees enrolled. Also, the estimate is that employers will pay $25-$38 million in non compliance penalties under this option.

Under the Arkansas Private option, over 1/3 of the existing Medicaid enrollees will move to the private exchange along with hundreds of thousands (including newly eligibles not eligible under the do nothing option and workers eligible under both options). All of these populations will participate in cost sharing (acts as incentive to make better healthcare choices since own money involved), a huge reform vs. Medicaid. In addition waivers have enable Arkansas to do many additional reforms. Details and explanations of those will be made available separately. The impact on the state under this option is: $67 million help to state budget, $40 million per year in reduced uncompensated care loss, and $25-$38 million in penalties not incurred by employers. Hospitals will also be reimbursed at private insurance rates eliminating the $200 million a year shortfall there. The net annual benefit to the state budget and hospitals is about $300+ million ($67 million help via returned tax dollars + $40 million saved uncompensated care + $204 million hospital reimbursements).


This recommends Arkansas move forward with the Arkansas Private Option Healthcare plan instead of selecting the Obamacare do nothing implementation plan. This recommendation comes after policy makers in Arkansas worked hard to create a superior approach than either of the Federally mandated Obamacare implementation options (do nothing or Medicaid expansion). The Arkansas plan requires several waivers from the Federal Government and will immediately (after 120 days) revert to the Obamacare do nothing implementation option should those waivers be denied or the Federal triggers not be met at any time. The Arkansas plan also sunsets in 2017, no matter what happens (at that time another legislative action is required to move forward).

Basis for Recommendation:

1. The Arkansas plan achieves waivers and reforms that give Arkansas the opportunity to create a reformed healthcare model that can move the US away from government run models (e.g. Medicaid). If enacted successfully, Private Insurance options could replace Medicaid entirely and save the US as much as $1 trillion per decade beginning with 2020-2030.

2. The economics of Obamacare mean that Arkansas is losing $1.18 billion per year, of which $300 million will hit the state budget directly or indirectly. We cannot afford that budget cost without massive tax increases. The Private options returns $300 million per year to the state in ways that can be captured to reduce taxes on Arkansans and restore some of the $500 million we’ll be paying. This $600 million state budget swing is over 10% of our general revenue budget, the largest budget item we’ll deal with this year.

For both policy (fighting Obamacare and inventing a private model for the country) and fiscal (decreasing taxes instead of raising them) this recommends supporting the Arkansas Private option.

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