Arkansas Medicaid Plan Offers Mixed Lessons

The double-sided city of Texarkana, its residents sometimes quip, has two of everything. There are the mayors: one for the 36,000 people living west of Highway 71 in Texas, another for the 30,000 on the Arkansas side of town. There are the high schools: Texas High and Arkansas High, bitter football rivals.

And then there are the approaches to helping poor people get medical care. In Arkansas, lawmakers voted in 2013 to expand the state’s Medicaid program, taking federal money to buy private insurance for low-income adults. Texas, by contrast, has steadfastly refused to expand its Medicaid program.

So in Texarkana, access to free health care can be determined by the side of the street on which someone lives.

Shortly after Arkansas launched its “private option” plan expanding coverage for the poor, advocates for the uninsured began pushing Texas lawmakers to follow the lead and devise a “Texas way” to expand coverage. But in its first year, the Arkansas plan is costing more than expected, and a growing chorus of Texas Republicans is saying “I told you so.”

Backed by the influential Texas Public Policy Foundation, a conservative think tank, they now cite the neighboring state’s experience as a cautionary tale against Medicaid expansion in any form. Three other states also have received federal permission to try alternative forms of coverage expansion.

“What I’m seeing in a lot of those states is the illusion of flexibility,” said state Sen. Charles Schwertner, a Republican and chairman of the upper chamber’s Health and Human Services Committee. “You’re aware that Arkansas is over budget?”

Arkansas has enrolled about 213,000 people in its program, dropping the state’s share of uninsured roughly 10 percentage points between 2013 and 2014, according to state records. In Texas, by comparison, about 1 million people would be eligible for health coverage under an expansion.

But in its first nine months, Arkansas spent $9.3 million more than it said it would, according to the state’s Department of Human Services. State officials say they have made changes to reel in costs.

Those who want to see Texas expand its coverage, meanwhile, say the foibles in Arkansas aren’t applicable in Texas, which can always craft a better plan of its own.

“The first thing I’d say is, we’re not Arkansas,” said John Hawkins, a senior vice president of advocacy for the Texas Hospital Association, which favors a private-market coverage expansion. “Why would we give our leverage away, why would we even reject negotiating out of hand, when we don’t know what the possibilities are?”

It is a tale of two vastly different approaches to federal health care reform. The Lone Star State, under the leadership of outgoing Gov. Rick Perry, has adamantly opposed all aspects of “Obamacare,” including an optional expansion of Medicaid financed mostly with federal money. Arkansas, on the other hand, was the country’s first to pioneer a “private option,” passed by the state’s Republican-controlled legislature in 2013, using federal money to buy private insurance for residents below 138 percent of the poverty line.

When Arkansas lawmakers negotiated the three-year plan, they agreed to spend no more than $477.63 per person each month in 2014. But at the end of the year, the actual per-person-per-month cost was $489.85, according to the state.

If Arkansas still exceeds the spending cap after three years, the state will be on the hook for the extra cost, but state officials say they are not concerned.

“There’s a caveat,” department spokeswoman Amy Webb said. “We have not yet reconciled with the insurance carriers related to cost-sharing reduction or medical necessity. At the end of our three-year waiver, we feel like we will be within the limit.”

That has not stopped the critics. John Davidson, a health policy analyst at the Texas Public Policy Foundation, said Texas cannot afford the risk of cost overruns jeopardizing other priorities, like education.

“When you put a population that’s eligible for Medicaid into private coverage like Arkansas did, you’re going to end up paying more because you’re paying premiums on a private plan, and those are just more expensive,” he said. “At the very least, they’re nondisabled people who are working age, so the idea for a lot of conservatives is that for folks who are able-bodied and working age, what they really need is a full-time job, not Medicaid expansion.”

The future of Arkansas’ program is itself unclear. After sweeping Republican victories at the polls in November, state lawmakers there are threatening to repeal the expansion altogether. Newly elected Republican Gov. Asa Hutchinson has said he will give a speech on the future of the program next week.

Twenty-seven states and the District of Columbia have expanded Medicaid, and seven others are considering it, according to the Kaiser Family Foundation. Arkansas would be the first state to drop out of an expansion.

In Texas, Medicaid covers 3.7 million poor, disabled and elderly people, including children, and costs roughly $40 billion per year, of which the federal government pays about 60 percent. Under the Affordable Care Act, the federal government offered to cover all of Texas’ Medicaid expansion costs for three years, eventually reducing its contribution to 90 percent.

Republican lawmakers considered an alternative “Texas solution” to Medicaid expansion during the 2013 legislative session that would have drastically reformed the program. That proposal, led by state Rep. John Zerwas, R-Richmond, failed. The Legislature ultimately approved a requirement that the Health and Human Services Commission receive legislative approval before expanding Medicaid eligibility.

Texas’ Legislature has only moved further to the right since then. Whether Zerwas will stick his neck out again this year remains to be seen, he said.

“There needs to be kind of a sense from the highest levels of leadership whether there’s interest and support for that,” he said. “I don’t have any sense of where the new governor’s office is on this, where the lieutenant governor is on this, or the speaker, for that matter.”

Gov.-elect Greg Abbott, who campaigned fiercely against Obamacare as federal overreach, has not publicly appeared receptive to Medicaid expansion. “Fear not — Governor-elect Abbott has fought Obamacare and will continue to fight against it,” Abbott spokeswoman Amelia Chassé recently told the conservative National Review.

But he has not categorically ruled out an alternative form of expansion, either. This week, in an interview with The Wall Street Journal, he gave advocates for such a program a sliver of hope.

Though he is against the expansion of Medicaid as it exists, Abbott said, “like anyone with an inquiring mind, we’ll look at any idea anyone has.”

Disclosure: The Texas Public Policy Foundation is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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