News » The Big Picture

Expansion FAQ


Last week, Gov. Mike Beebe announced that the feds have given Arkansas permission to pursue a unique plan for expanding health coverage, turning the Medicaid expansion debate upside down. Here's your one-stop shop for the basics on the game-changing, name-changing Arkansas healthcare deal.

So what's the deal?

If you want lots of details, see, but here's the short version: Instead of covering low-income, uninsured folks via Medicaid, this plan would have the government paying the full premiums of private health insurance plans for those very same low-income, uninsured people. These are people who earn less than 138 percent of the federal poverty level.

What should we call it?

It's still expansion, but no longer expands the Medicaid program. We've been going with the "private option" because the feds have given the legislature the option to expand coverage via private insurance.

Does this make expansion more likely to pass the legislature?

Big time. Getting a super-majority is hard. Getting a super-majority with a General Assembly dominated by anti-Obamacare, Medicaid-hating true believers was probably impossible. The new expansion deal looks likely to pass.

Who benefits from the new deal?

Insurance companies, who just got more than 200,000 new customers. And hospitals and providers, who will presumably get higher reimbursement rates from private insurance companies than they would have from Medicaid.

What about low-income, uninsured folks?

Just as with the old deal, they will gain coverage. Among other benefits, having health coverage leads to better health outcomes and saves lives. It could even be a better deal for them than Medicaid expansion. Private insurance may not be cost-effective (more on that below), but the expansion pool won't be bearing the costs (though there are some who might be subject to small co-pays). That could mean better access and better health outcomes. Republican lawmakers are convinced of this. But even if it's not so, given the dire prospects for full Medicaid expansion, it's worth repeating: under this deal, more than 200,000 low-income uninsured people would gain health coverage.

What about people who meet current eligibility requirements for Medicaid?

They stay on Medicaid, though there are some transfer populations getting limited coverage from Medicaid, such as pregnant women, which would move to private insurance.

Will it cost more for taxpayers?

Almost certainly, yes. Paying for private health insurance is more expensive than Medicaid. There is a lot of empirical evidence that this kind of approach is more costly.

How much more?

Nobody knows. The Congressional Budget Office has projected recipients on the exchange to cost 50 percent more than recipients on Medicaid, which amounts to $3,000 more per person to pay for them on the exchange. For various reasons, that's not likely to be a perfectly applicable estimate, but it's too early to say whether it's too high or too low. But the extra cost could amount to hundreds of millions of dollars per year.

Wait a second, don't Republicans hate government spending and high costs?

Whether their reasons are philosophical or cynical, local Republicans have a massive preference for routing the money through private companies instead of expanding a public program. It doesn't hurt that they can plausibly say it's NOT OBAMACARE.

Who pays for this?

As before, the feds are offering 100 percent match rates for the first three years. After that, the state will have to start chipping in, and the fed match rate will gradually fall to 90 percent by 2021.

Sounds like a lot of money coming into the state?

It's a massive stimulus that will help the state's bottom line. Republicans used to call that "funny money" but have changed their tune.

So it's a good deal for the state?

Yes, just like Medicaid expansion, it's likely a net fiscal positive because of additional state tax revenues, reductions in uncompensated care and some Medicaid populations transitioning to higher match rates. Again, Republicans used to think these offsets were baloney, but their reading of the math has evolved thanks to the "private option."

Wait a second, is this legal?

Based on an obscure section of the Social Security Act, probably.

Won't other states want this?

Seems like it, and rumors have floated about Ohio, Texas and Florida. No word from HHS about whether it's on the table elsewhere, though other states will be unhappy campers if this was an Arkansas-only "Razorback Rule."

Add a comment