Is Arkansas’ ‘Private Option’ Medicaid Expansion A Solution For Other Red States?

LITTLE ROCK, Ark. — In late 2012, a small group of Arkansas Republicans met within the marbled halls of the Capitol and set a politically hazardous course. Their destination was a place few conservative lawmakers wanted even to think about.

How could they transform the Affordable Care Act, a law they detested, into a tonic for their unhealthy and poverty-stricken state, and still honor their conservative principles?

The result would be Arkansas’ “private option” Medicaid expansion, an innovative — and untested — program that has extended health coverage to more than 233,000 poor Arkansans.

Some Georgia lawmakers, consumer advocates and health care providers are pointing to the ambitious experiment in Little Rock as a possible way to expand health coverage to more than half a million low-income Georgians. A growing number of other red states are also taking note of Arkansas’ private market-based approach, which is seen as a more politically palatable path to expansion for Republicans.

“We knew the system was broken and needed to be reformed,” said Arkansas state Sen. David Sanders, a Republican and a chief architect of the Arkansas private option. “We’re just getting started.”

Medicaid expansion is a critical part of Obamacare’s aim to provide millions of uninsured Americans with health coverage. But when the U.S. Supreme Court ruled in 2012 that the federal government couldn’t force states to expand Medicaid, many Republican-led states, including Georgia, doubled down on their refusal to expand.

Georgia Gov. Nathan Deal and conservative state lawmakers say the state can’t afford to expand an already overwhelmed and broken Medicaid system. Deal has said of late that everyone needs to wait until the Supreme Court rules this summer on a new challenge to the law that threatens to strip millions of Americans of federal tax credits that made buying insurance possible.

“We can’t even begin to say what the playing field will be after that,” Deal spokesman Brian Robinson said. “No one could have predicted the nuanced ruling the court issued in 2012 that kept the law alive but drastically changed it.”

In the meantime, Georgia’s uninsured rate is now second highest in the nation at 19.1 percent, second only to Texas, while other states’ rates have plummeted. Under the private option, the Razorback state’s uninsured rate has dropped more dramatically than any other state in the nation.

Under traditional Medicaid in Arkansas, the state pays doctors and hospitals directly for providing health care to the poor. Each lab test, doctor visit, surgical procedure or X-ray is billed to the government. Under the private option, the state uses federal dollars for Medicaid expansion to buy private health insurance for the poor.

Hospitals like it: far more of their patients are now paying customers; doctors like it: insurance companies pay them much more than Medicaid does; insurance companies like it: they get a lot more business, much of it paid for by the government.

Supporters say the program will ultimately cost less than if the state had expanded its existing program as is. The theory goes that private insurers are more efficient and can help keep people healthier, and lower overall costs, by better managing patients’ overall care.

Critics in Arkansas, just like critics in Georgia, argue that their state can’t possibly afford the cost of extending health coverage to so many more people. And, they say, the federal government can’t be trusted to keep its pledge to pay 90 percent of the cost of Medicaid expansion.

Sanders said he sees Medicaid expansion as a stop-gap measure, allowing lawmakers time to work on even larger pro-market reforms to the health care system. In recent years, the state created a special office to investigate Medicaid fraud, improved how it verifies who is Medicaid-eligible and implemented a new payment system that pays doctors based on quality of care.

“We’re not talking about pouring concrete here,” he said. “We’re molding clay.”

‘A Deep And Abiding Concern’

So far, the private option appears to be paying off.

In the past year, Arkansas’ uninsured rate plunged from 22.5 percent to 11.4 percent, according to the latest Gallup survey. The number of uninsured patients flooding hospital emergency departments fell by more than a third in the first six months alone. Hospitals also saw the cost of caring for the uninsured drop by roughly $70 million.

Those benefits are undeniable, recently-elected Arkansas Gov. Asa Hutchinson said in a speech earlier this year. Still, the Republican leader isn’t convinced the private option is what’s best for his state.

While the federal government is paying 100 percent of the cost for three years, the state will eventually have to pick up 10 percent of the cost — more than $200 million annually. That’s almost a third of the budget for all state higher-education institutions, so there are real consequences for the budget and other services, Hutchinson said.

Those opposed to the private option were right to question its costs, said Hutchinson, who opposed the Affordable Care Act. The Legislature recently voted to continue the private option through its three-year trial phase, which concludes at the end of 2016.

In the meantime, lawmakers must look at ways to make Arkansas’ health care system affordable, while extending health coverage to the people who need it, Hutchinson said.

“Whether you are for or against the private option, there is a deep and abiding concern for those without health coverage,” he said. “The human side tugs at our heartstrings and rightfully is a factor in this debate.”

‘My Hands Were Tied’

Some jobs don’t offer insurance. Donna Foster’s is one of them.

The single mother of two works as a home caregiver for the elderly, cooking and cleaning, bathing and doing laundry. She makes less than $9 an hour, a wage that forced her to choose between buying insurance or paying rent and putting food on the table.

She chose the latter. So Foster, 44, skipped doctor’s appointments to monitor her high blood pressure. She suspected she might have diabetes, a chronic disease that runs in her family, but couldn’t afford the test to find out. Her legs and feet began to tingle. A constant feeling of exhaustion made it a challenge just to get out of bed in the morning.

“I know that it can cause congestive heart failure or diabetic coma. It can make you sicker than a dog,” said Foster, who lives in Morrilton, Ark., a town of roughly 7,000 northwest of Little Rock. “It worried me because I needed (the test), but my hands were tied. I just tried to control my diet.”

Foster is one of the more than 233,000 Arkansans who got insurance through the private option. Now, she can go to the doctor whenever she needs to for $8. Her medications cost $3 or so.

And she is indeed diabetic.

“I was tickled to death,” Foster said when she learned she qualified for the program. “I don’t have to worry about paying (my) doctor bill off or getting the lights cut off.”

The jump in health care coverage has cut Arkansas’ uninsured rate to its lowest level in more than a quarter-century. A majority of people on the private option work for a living. Many live in rural areas.

Before the private option, a parent with two children couldn’t qualify for Medicaid if she made more than roughly $3,300 a year. And, as in Georgia, adults without children couldn’t qualify at all.

“In our state, you had to be dirt poor,” said Dr. Rick Smith, dean of the College of Medicine at University of Arkansas for Medical Sciences. “They can support their families, but they can’t get their treatment.”

‘A Great Deal Of Discord’

State lawmakers voted earlier this year to continue funding the private option. (At least three-quarters of the Legislature must approve funding every year.)

But the governor and other Arkansas lawmakers have continued to raise concerns over the private option’s cost.

There has been “a great deal of discord between (lawmakers) and the general public,” state Rep. Kelley Linck said during a committee hearing last month. “Many people felt that Medicaid expansion, no matter how we did it, was a bad idea.”

One of Arkansas’ top health officials was skeptical of the private option too at first.

John Selig, head of the state Department of Human Services, worried that the private option might be too complicated and expensive. Private insurance typically pays providers far more than Medicaid, which often doesn’t cover the actual cost of care.

But that’s where the “private” aspect of the private option comes into play: insurers have a strong incentive to promote preventive care and other ways to keep people healthy.

“The private sector, in theory, is more efficient,” Selig said. “That’s part of what we’re testing. Are they more efficient? Can they keep costs down?”

Indeed, Selig’s agency estimates the private option could save Arkansas nearly $1 billion over 10 years. That includes the roughly $360 million the state would have paid for uncompensated care over that time, the department’s latest estimates show.

It’s expected to create thousands of new jobs and infuse hundreds of millions of dollars into the state’s economy.

Using Medicaid dollars to buy private health plans has also been a plus for the broader insurance market, Selig said. The Medicaid expansion population is healthier and younger than the rest of the population with insurance through the state’s online marketplace.

That’s helped reduce overall premiums on the marketplace by 2 percent for 2015, Selig said. It’s also attracted more insurers with five insurance companies now offering plans statewide, versus just one before, he said.

“The entire market is benefiting because we brought healthy lives into the market,” he said. “That’s a pretty big impact for a little state like Arkansas.”

‘It’s Tough For A Lot Of People’

The private option is working for Orlando Gonzalez.

The 27-year-old from a small town in southeast Arkansas had always been relatively healthy and never thought much about getting insurance. So he didn’t worry when he took a lumber mill job that didn’t offer it.

That is until one day last winter when he felt stabbing pains in his stomach and began to vomit violently. After Gonzalez made multiple trips to the emergency room, doctors discovered a large mass in his stomach. It wasn’t cancerous but still needed to be removed surgically to avoid damage to surrounding organs.

Gonzalez and his family could not afford the nearly $35,000 or so the surgery would cost, so he put it off.

“Around this part of the woods, it’s tough for a lot of people,” he said. “There’s not these big corporate jobs.”

He eventually applied for the private option and soon landed back in the hospital with a serious infection. Doctors removed the mass and Gonzalez is now on the mend and working toward his dream of opening his own gym.

Gonzalez is a Republican who doesn’t like Obama. But he believes the private option is a great thing when people need it.

People should work when they can and not rely on tax money, but you can’t always do that, he said.

“If you physically can’t work, I’m in full support of it,” he said. “If you’re not working just because you don’t want to work, then that’s a different story.”

‘We Are Arkansans’

Arkansas’ private option will continue as is — for now.

It is set to expire at the end of 2016; meantime, a task force will explore ways to keep health care costs in check, while maintaining coverage for individuals who got insurance under the private option.

Ultimately, the Legislature could decide to extend the private option or some variation of it. Or it could opt to do away with the program altogether and try something different, a fact that has consumer advocates and health care providers worried.

There’s concern that changes could create new barriers to people getting the care they need, said Marquita Little, health policy director of the nonprofit Arkansas Advocates for Children & Families. People with chronic illnesses are getting help. More children now have health coverage as a result of their parents getting private option coverage, she said.

“Having access to coverage allows us long-term to have a healthier population,” she said, calling the private option “hugely successful.”

During a speech in January, Gov. Hutchinson said Arkansas needs comprehensive health care reform based on the conservative principles of choice and competition while encouraging people to take responsibility for their own health care decisions. It must be a system that Arkansas can afford and doesn’t continually eat up more and more taxpayer dollars, he said.

And, Hutchinson added, leaders must look for ways to assure health care for those Arkansans who are now covered by the private option.

“We are Arkansans,” he said. “We look out for each other.”

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