Gov. Asa Hutchinson made general suggestions
about the future of the private option
to the Arkansas Health Reform Task Force
on Wednesday. It was largely a mish-mash of stale talking points, some coherent and some not. Was it a bold vision for the future of health care reform in Arkansas? No, it was not. Instead, Hutchinson offered vague gestures that would tinker with the private option, ostensibly to make it more "conservative," but that in practice would make the program more bureaucratic and complicated
, without accomplishing much. We've seen this movie before. Red states that want to continue accepting the billions of federal dollars need to offer a compromise to appease the anti-Obamacare crowd, so they come up with tweaks that are more gestural than productive (skin in the game! private is better! work requirements!). Hutchinson even mentioned the dream of a block grant. Can't have a game of GOP Talking Points Mad Libs without that.
Often these talking-point tweaks are awkward fits or even counterproductive to the goals of the program. Some of Hutchinson's ideas don't seem to have a coherent rationale at all. The task force remains on a quest to find, well, something
that would allow the state to continue the private option while plausibly being able to say that the private option is over and they came up with something better. Ultimately, if implementing a few of Hutchinson's proposals are the cost of continuing coverage for more than 200,000 Arkansans, that's a deal worth making. But the task force would be better served looking for actual improvements to the program rather than Hutchinson's jumble of half-baked slogans.
I've been out of town travelling since Wednesday morning without much internet access but thought I would offer some quick reactions to Hutchinson's major seven talking points, listed below.
* A little bit of background regarding the current policy status quo to keep in mind: the private option uses Medicaid funds available via the Affordable Care Act
to purchase private health insurance plans for low-income Arkansans. These plans are purchased on the Arkansas Health Insurance Marketplace
, the regulated marketplace created by the ACA where other Arkansans shop for individual health insurance (these are folks who don't get insurance through their job or a big public program like Medicare). Arkansans who make less than 138 percent of the federal poverty level (that's around $16,000 for an individual or $33,000 for a family of four) are eligible for the private option. Most of them get private plans, but around 10 percent are deemed "medically needy" by a health screener and these folks — those likely to need more medical services — are routed to the traditional Medicaid program.
Let's look at Hutchinson's seven points one by one:
1. Implement mandatory employer-sponsored insurance (ESI) premium assistance.
This is the one genuinely new idea that the governor had to offer. The details here are a little fuzzy, but it appears that the basic concept would be twofold: 1. The state would use Medicaid expansion funds to offer subsidies to reduce the cost of premiums to low-income, PO-eligible employees who are offered insurance by their employers. 2. If PO-eligible employees are offered this subsidized insurance, that’s their only option; they would not be allowed to choose the private option instead.
The governor suggested that the subsidized ESI plans would be similar in price and coverage to the private option plans (which presumably means Medicaid would be chipping in a significant amount to ensure very limited cost-sharing and premiums for these beneficiaries).
From the perspective of beneficiaries, this might be just fine, although like many of Hutchinson's suggestions, the potential for administrative hassle is real (if a PO-eligible beneficiary lost a job and the ESI insurance with it, he or she would presumably be forced to re-enroll in a PO plan; the "churn" between PO plans and ESI plans would inevitably lead to gaps in coverage, threatening access to care).
The main point of this proposal, as far as I can tell, is to force employers to chip in part of the costs of insuring employees with low incomes, rather than Medicaid picking up the full tab for premiums. That would end up saving the PO some money by pushing businesses to bear some of the costs. Right now, an employer like Walmart can tell many employees to go to the private option to get zero-premium health insurance. Hutchinson's dream is that instead Walmart would offer health insurance and Medicaid would chip in some "premium assistance" to make it equivalent in value to the private option. This amounts to cost shifting from Medicaid (paid for by the feds, plus the small match rate from the state) to Arkansas businesses. I'm not sure how happy businesses with a lot of low-income employees are going to be about this concept, but we'll see. And by the way, the cost-shifting doesn't necessarily end there: if employers have to pay for more employee benefits, that will typically lead to lower wages for employees.
The potential for administrative complexity here is massive, as DHS and the Medicaid program would have to coordinate with businesses across the state, each offering their own health insurance plans. It's not clear how much money this would save. Hutchinson suggested (anecdotally) that low-income employees were passing up perfectly good ESI to go on the private option, but we would need better statistics on how many private option beneficiaries are currently being offered adequate insurance to know whether the potential savings would be worth such a huge bureaucratic undertaking.
Meanwhile, the proposal ultimately only makes sense if employers play ball. Not all businesses offer Obamacare-compliant insurance to all employees, particularly when we're talking about the PO-eligible population.
The governor used the word "mandate" to describe this ESI program, usually a dirty word among Republicans when it comes to health care, but he doesn't appear to be suggesting that the state impose any additional requirements
on employers or employees. Instead the idea is that the PO would not be available to employees who could get this subsidized ESI. But it's worth noting that he is
relying on Obamacare's mandates: the individual mandate (employees who don't get insurance face a federal tax penalty) and the employer mandate (larger employers are set to face penalties in 2016 if they don't offer affordable health insurance).
The employer mandate itself, meanwhile, keeps getting delayed and only applies to businesses with at least 50 employees. More broadly, the Congressional Budget Office has projected that the number of employers offering health benefits will decline over time. Hutchinson seems to like suggestion #1 in part simply because he believes that getting health insurance from an employer is the right and true way to get health insurance. He dreams of a universe where all Arkansans get ESI. As it happens, economists from both the left and the right agree that over-reliance on employer-sponsored health insurance is a disaster and the biggest problem with the American health care system. But even putting that aside, Hutchinson's attempt to make health care in Arkansas even more
tethered to employer-sponsored benefits is likely to amount to short-term fiddling that will be overwhelmed by longer-term trends. Hutchinson may feel nostalgic about ESI for whatever reasons, but a system dependent on ESI is not a long-term answer.
Oh, and one unintended consequence of this proposal: the governor would be pulling people out of the Marketplace (particularly when combined with #6 below). That would be unhappy news for the insurance companies, but it would also likely lead to higher premiums for all Arkansans who shop for policies on the Marketplace. That’s because the private option population leans younger and healthier than the rest of the Marketplace, leading to lower costs and thus lower premiums for everyone. Take some of them out and premiums will likely go up. Even worse, if Hutchinson pulls out too many customers, the market would become less attractive and would risk losing a carrier (or being less likely to bring in a carrier down the road). Blue Cross Blue Shield isn’t going anywhere, but one of the less dominant carriers might bail if the number of customers drops dramatically, leading to less competition and less choices on the Marketplace.
2. Implement premiums for individuals with incomes more than 100 percent of the Federal Poverty Level.
This one is a standard talking point for GOPs who want to make the Medicaid program incrementally more Republican. Skin in the game! The feds have been strict about not allowing states to require that beneficiaries below the poverty line to pay premiums — but they’ve been open to other states (such as Iowa and Indiana) imposing very small premiums for beneficiaries who make more than that. Hutchinson floated the idea of setting them at 2 percent of income, similar to what other red states are experimenting with.
Requiring even small premiums in order for low-income people to maintain their coverage can end up pushing people off of insurance (or stop them from signing up in the first place), leading to gaps in coverage that threaten needed access to care. Meanwhile, the amount of money that can be squeezed out of these sorts of cost-sharing programs is minimal in terms of the overall cost of the program. Finally, implementing this scheme creates additional bureaucratic hurdles, putting the Medicaid program smack in the middle of the collections process (keep in mind that there are Medicaid rules around notice if people are kicked off of coverage, and missed premiums will lead to more "churn" and administrative burden as eligible beneficiaries lose coverage and then re-enroll).
Trying to impose premiums on this population makes little sense as policy, but it allows Republicans to grandstand about personal responsibility — and any policy tweak to the private option that makes things harder on poor beneficiaries seems to draw excitement from the many GOP legislators — so some version of this is probably inevitable if the private option is to stick around.
3. Work training referrals required for unemployed or underemployed.
Again, same old, same old: Hutchinson is spinning the GOP-talking-point classics. The Medicaid program is a health care program to make sure that even the poorest among us have access to care. Republicans love to dream of work requirements, recasting Medicaid as a carrot-and-stick program that would punish the unemployed by denying them coverage (despite the fact that there is no evidence that such a requirement would significantly increase employment
Hutchinson isn't suggesting work requirements
here. The feds have been crystal clear on this line in the sand: states cannot terminate people's Medicaid coverage if they don't have a job. However, they’ve been open to states, such as Utah, incorporating work encouragement
into the Medicaid program.
This is the space where Hutchinson and the task force could get creative, seeking to nudge or incentivize beneficiaries toward seeking employment, work programs, or job training (without threatening the health care access they are guaranteed by Medicaid). Perhaps beneficiaries could save on cost-sharing if they participated in jobs programs. In some cases work requirements are allowed for SNAP (food stamps); since many private option beneficiaries are also SNAP beneficiaries, one possibility is work requirements for SNAP dovetailing with work encouragement/training in the private option.
This is yet another area where the effort to stuff Republican talking points into the box of Medicaid rules typically ends up making the program more complicated, bureaucratic, and even expensive. That said, there is some promise in this idea if the state is actually willing to invest in outreach and training: in many cases, low-income Arkansans aren't aware of existing state resources for workforce training. A work encouragement or incentives program that identified low-income people interested in job training or job programs and helped connect them to available resources could be a positive ancillary benefit for beneficiaries.
The truth is that a workforce development program grafted on to the private option would be a small tweak to a big policy, and might not accomplish much more than making poor beneficiaries jump through additional bureaucratic hoops — but it's the sort of tweak that might be sellable as an Asacare "replacement" of the private option. As for work requirements
, the feds are not going to allow Arkansas or any other state to deny someone Medicaid health coverage because they don't have a job; it appears that Hutchinson and the task force are well aware of that.
4. Eliminate non-emergency medical transportation coverage
Sigh. Another well-worn idea from Republicans trying to bargain over the program in exchange for considering Medicaid expansion. Unfortunately this is one likely to hurt the most vulnerable low-income patients
The traditional Medicaid program guarantees non-emergency medical transport (NEMT) as a benefit — if a beneficiary can prove that they don't have a way to get to the doctor, the Medicaid program will provide them with a ride. This can be a particularly important in rural parts of a state like Arkansas, where providers might be some distance away. A recent study found
that ending NEMT leads to "worse health outcomes, increased hospitalization, and more preventable deaths for a state’s sickest individuals."
GOP lawmakers have long focused on nixing NEMT as a way to make the Medicaid program more Republican. The feds granted Iowa permission to end the NEMT benefit for one year as part of Iowa's own waiver program for Medicaid expansion, prompting private option architect Sen. David Sanders to comment
, "we want what they have." The feds have extended the NEMT waiver in Iowa despite the fact that Iowa's preliminary findings "raised concerns about beneficiary access[,] particularly for those with incomes below 100 percent of the FPL."
Arkansas already amended the private option during the 2014 fiscal session
to limit NEMT to eight trips per year (beneficiaries can still go through a process of requesting additional trips). Hutchinson presumably hopes to eliminate NEMT altogether, leaving beneficiaries without transportation no means of getting to the doctor. Hutchinson claims this would save $14.7 million per year. But eliminating NEMT can end up increasing other costs: by pushing beneficiaries to call the ambulance more often and by leading beneficiaries to skip preventative care altogether, leading to higher long-term costs for care. Hutchinson appears to be banking on the gross savings from eliminating the benefit, but this approach may well turn out to be penny-wise and pound-foolish.
Given the feds' openness to waiving the NEMT benefit in other states, this is likely a gettable ask for Arkansas. Even if some of the savings that Hutchinson promises actually materialize, they will come by putting access to care at risk for the state's most vulnerable citizens. Making the Medicaid program more Republican
One big question is whether Hutchinson wants to end NEMT for all beneficiaries, or just those with private plans. As part of the private option, the state is attempting to route the most "medically needy" beneficiaries to the traditional Medicaid program. If these beneficiaries still got the NEMT benefit while it was eliminated for those on private plans, that would at least lessen the blow in terms of endangering the health of the neediest patients.
5. Cost savings for Medicaid.
The private option is just a sliver of the state's overall Medicaid spending and Hutchinson mentioned a grab bag of possibilities for reducing overall program costs, including managed care, lowering Medicaid reimbursement rates, and expanding the state's payment improvement initiative.
Well, lowering costs...sure! It's easy to tease Hutchinson here about vague promises of unspecified cost savings. But obviously trying to make the Medicaid program run as cost-effectively as possible is a good thing — and in fact the state's payment improvement initiative, implemented prior to the private option during the Beebe administration, already appears to be showing promising early returns on controlling Medicaid costs. If puffing his chest about these ongoing efforts helps Hutchinson to convince lawmakers to continue the private option, that works.
Hutchinson's claim that the state needs to reduce Medicaid reimbursement rates, on the other hand, just feels like a bait and switch, with potentially nasty consequences. Keep in mind that the state's own consultant, using real claims and premium data, found that the private option will save money on net for the state
even during the years when Arkansas has to start chipping in. Hutchinson pretended that the consultant's finding didn't exist and claimed that the private option would cost the state money, necessitating cuts elsewhere (the governor pulled this trick by pretending, without explanation, that Arkansas will not accrue any state tax revenues at all
on billions of dollars in federal money pouring into the state).
If the private option saves the state money on net, it's incoherent to say that the only way to keep the private option is to make cuts to the already barebones traditional Medicaid program. It's almost like Hutchinson is using the fact that the private option is politically vulnerable in order to make unrelated cuts to programs for the poor.
And let's keep in mind that the state likely already under-reimburses Medicaid providers, threatening access to care for vulnerable beneficiaries. This hurts rural and poorer areas hardest; one broker told the Times
that only one primary care physician in all of Crittenden County is taking new Medicaid patients.
The traditional Medicaid program serves children, the disabled, very low-income parents of dependent children, and the "medically needy" portion of the private option. These are the people most in need of medical services, and Hutchinson is threatening cuts that will likely lead to fewer providers, reducing access to care. And note that Hutchinson is also pushing to move the poorest private option beneficiaries to traditional Medicaid too (see item #6 below). It is simply perverse for the state to move the medically needy and the poorest beneficiaries into the Medicaid program while simultaneously slashing funding. It starts to look like the state is punishing those most in need. And again, Hutchinson is offering zero evidence that this is necessary in order to continue the private option. Anyone want to take a bet on how long it takes for Hutchinson to put any savings from slashing Medicaid into tax cuts for people who, well, aren't exactly Medicaid eligible?
6. Limit access to private plans to working people.
Well, this one is original. It makes absolutely no sense whatsoever and achieves no policy objective, but, uh, it’s something.
The idea here is to keep the private option in place but divide beneficiaries – those who make a little more money would be sent to private plans, while those who make less would go to
the private option
traditional Medicaid (Hutchinson suggested something like 25 percent of FPL as the cutoff line).
Hutchinson suggested that this might save money. That's true if the traditional Medicaid program is in fact significantly cheaper than covering beneficiaries via private plans. We have long argued
just that: that the gross costs of offering coverage through traditional Medicaid would be cheaper than doing so via private plans (it's been strange to watch some anti-PO Republicans in Arkansas
come around to the virtues of the low-cost Medicaid program). But if you think the Medicaid program would be a more cost-effective way to provide coverage...why not just go with traditional Medicaid expansion
? If Hutchinson thinks he can save on some beneficiaries, why not save on all?
Instead, Hutchinson is proposing a strange, seemingly pointless hybrid that would make the program substantially more bureaucratic, administratively complicated, and confusing. The state would essentially be running two programs — Medicaid and the private option — for two different income categories. Three if you include the ESI premium-assistance program (#1 above).
It’s important to note that this would demand even more means testing: the state would have to identify which beneficiaries fall into which income category, and slot them accordingly. Does that mean that a very low-income person whose income changed slightly during the year would need to be flagged as part of the state's ongoing income verification process? We are watching, in real time, how disastrously and carelessly the Hutchinson administration has gone about the income verification process. We already know that beneficiaries who were eligible according to the state’s own wage data were flagged because they moved across Medicaid categories and ended up losing coverage when they didn’t get their paperwork processed within an unreasonable and unworkable 10-day deadline. Now Hutchinson is proposing creating another
income category line that the state would have to try to monitor, potentially creating another flash point for purges of eligible beneficiaries.
If the state wants to pursue the private option experiment, it should pursue the private option experiment. If it wants to go with traditional Medicaid expansion instead, it should do that. Creating a hybrid of the two will just lead to more administrative burden and more "churn," hassles, and gaps in coverage for beneficiaries forced to navigate an even more confusing system.
Hutchinson seemed to suggest that this scheme would somehow incentivize work. I'm sorry, but this is just ludicrous. Hutchinson is imagining that there is a poor beneficiary who will only choose to take a job if it means moving from free Medicaid coverage to free private coverage? What we have here is a mish-mash of free-floating Republican preferences (private is better; make things hard on beneficiaries of social safety net programs so they’ll be incentivized to work harder) — but no coherent relation to the real world or to good policy.
And by the way, if private plans are so much better, if they're the special prize that Hutchinson is bestowing upon those who make a little more money, than why is the state sending the medically needy — the sickest patients most in need of care — to the traditional Medicaid program?
Thinking about #5 above, this supposed incentive structure only halfway makes sense if Hutchinson intends to intentionally make traditional Medicaid coverage much worse. That amounts punishing the state's most needy citizens.
This one may be a non-starter in the end. A number of pro-PO Republicans have told me that that they hate this idea because it would expand traditional Medicaid program, precisely the outcome that the private option was supposed to develop an alternative (this pushes things a little closer to the original intention of Obamacare Medicaid expansion, they correctly note).
Even if it saves money on the federally funded coverage (a contention that pro-PO Republicans dispute), there are also costs to the state of shifting more folks to Medicaid. It reduces the revenues from premium taxes imposed on private option plans that insurance companies sell. And it would have the unintended consequence of leading to higher premiums and potentially less competition on the Arkansas Health Insurance Marketplace. Same issue applies to #1 above: the governor would be pulling an awful lot of people out of the Marketplace. Since the private option population leans younger and healthier than the rest of the Marketplace, this would lead to higher costs and premiums for everyone once those customers were pulled out. And less customers means a less enticing market for insurance carriers, potentially leading to less competition and consumer choices down the road.
Whatever you think of the private option experiment as an alternative to Medicaid expansion, it does have some unique virtues; Hutchinson would be keeping the policy in place while undercutting those virtues. Why?
7. Strengthen program integrity.
The state should absolutely work to make sure that the people in the program are actually eligible. The challenge that all states face is doing so while protecting beneficiaries who are actually eligible for the program and without creating too much administrative burden for state agencies and for the beneficiaries themselves. Hutchinson refuses to acknowledge this, but the state has failed spectacularly on this front. The disastrous rollout of the state's troubled renewal-and-eligibility-verification system has led to a bureaucratic nightmare for DHS and tens of thousands of beneficiaries losing coverage despite being eligible for the program according to the state's own data.
Again, the state needs to do its due diligence in terms of verifying income during the required annual renewal process, and doing it right will lead to cost savings. But we know that the state used an overzealous and unworkable strategy that cut off coverage for eligible beneficiaries. We know — right now — that eligible beneficiaries who have sent in the required paperwork are still
without coverage. Under the circumstances, to hear the governor now prioritizing culling the rolls as a cost-saving measure is disturbing.
The governor claimed that once the process is over, the rolls will have declined by 30,000 people. But neither he nor DHS has offered any evidence of this, and the director of DHS has admitted that many of those whose coverage has already been terminated are in fact eligible. Right now, Hutchinson should be proceeding cautiously and prioritizing putting safeguards in place, developing a better outreach program, and reinstating eligible beneficiaries currently facing potential dire consequences. Instead, at this very moment, Hutchinson seems to be putting political pressure to cull the rolls by a certain target amount, and to produce a certain amount of cost savings.
Doing the renewal process correctly really will keep the rolls from becoming bloated with ineligible beneficiaries, and really will reduce overall costs. And the state is within its rights to do ongoing verification checks throughout the year. But if this approach is really going to be about "program integrity," then the governor must put more effort and emphasis into protecting those who are actually eligible, something he has shown no interest in thus far.