State Medicaid plan gets a lift from study

Expanding Medicaid through private insurance won’t be a budget buster for Arkansas or the federal government.

Consultants estimate that by 2015 it would have a high end price tag of about $130 million more than it would by just expanding the existing program. But the difference would probably be less than $130 million. And it might not cost any more at all, state Department of Human Services leaders said Monday.

More taxpayer dollars would be spent - perhaps as much as 14 percent more - than by simply expanding the existing $5 billion program to cover poor Arkansans, said Human Services Department Director John Selig, who cited a study conducted by the consultants.

But the department said the report also suggested that providing 250,000 Arkansans with private insurance - their premiums paid by Medicaid- could be done “with existing state resources,” meaning that when the state starts shouldering 10 percent of the bill in 2020, it can likely do so without tax increases or budget cuts.

And the $61 million deficit facing the existing Medicaid program? Gone and replaced with a $28 million surplus in the coming year for the program now covering about780,000. The current proposed freezes and rate reductions will remain in place as will Democratic Gov. Mike Beebe’s recommended funding of $160 million.

That’s a welcome turn of events, said Beebe, who has fought with a GOP-controlled Legislature to expand health coverage to the state’s working poor who earn up to $15,415 annually.

“Good numbers, really good numbers - and they’re not our numbers. In fact, they are numbers from real reputable folks,” Beebe told reporters at the Capitol.

Many lawmakers had been concerned that funneling low-income Arkansans onto the state’s health-insurance exchange would prove more costly than just enlarging Medicaid’s rolls. A Congressional Budget Office report last year estimated that it would cost 50 percent more. But the study, done by Manatt, Phelps and Phillip LLP and by Optumas, estimated that Arkansas’ model would cost no more than about 14 percent more.

Not accounting for inflation, the state’s share of the cost of paying for expansion could be as little as $13 million in 2020.

Arkansas has been the focus of intense national attention since Beebe unveiled the unprecedented deal with the federal government in late February. One criticism has been the cost, including by some Republicans, whose leaders first floated the idea.

Worries about sticker shock grew among some lawmakers when some national experts said the “private option” could be more expensive. Those estimates relied mainly on the Congressional Budget Office analysis.

One key GOP lawmaker said he was happy with the study’s findings of relatively low cost compared with traditional expansion. But Rep. John Burris, a Harrison Republican, had already predicted the “private option” wouldn’t break the bank.

While a rosy fiscal projection was “good news” and a welcome affirmation, Burris said, it still doesn’t guarantee success for the dominant issue of the session.

Republicans want more details and a written guarantee from the federal government that the deal meets legal and cost requirements, he said.

“We’re not going to pass a bill and find out what’s in it later,” Burris said, alluding to comments made by former U.S. Speaker of the House Nancy Pelosi before Congress passed the new health-care law in 2010.

Last week, the state sent an outline of its plan to the U.S. Department of Health and Human Services. They have had encouraging conversations with federal health-care officials, but written permission requires more “specificity,” said Andy Allison, state Medicaid director. That will take some time, he said, but he predicted that more detailed plans may “go together hand in glove” with the political debate at the Capitol.

The Obama administration “remains responsive to the political process here,” Allison said.

Arkansas’ plan is cheaper than expected for a variety of reasons, state Human Services Department officials said.

The gap in payments to providers between private insurance and Medicaid is much less in Arkansas than the national average - about 25 percent. Nearly doubling the number of people in the exchange to about 450,000 will attract more insurance companies to the state, they hope, which will lower costs through increased competition. The state’s Medicaid-payment overhaul, which seeks to contain costs by restructuring payments and discouraging waste, will also help, the study concluded.

One possible snag is if not enough insurance carriers enter the market to drive down prices. Insurance Commissioner Jay Bradford said that his department has received six inquiries from carriers not currently serving the state and three more from stand-alone dental insurers. None of them has formally applied to participate in the exchange. The deadline to do so is at the end of June, he said.

Bradford said he’s confident there will be enough competition, perhaps as many as a dozen players. Allison said the study assumed “significantly lower” numbers of companies than Bradford hopes will enter the state.

And Selig said that he’s confident that the influx of new people into the market will offset many of the costs.

Meanwhile, Republican lawmakers are cautiously optimistic, said Sen. David Sanders, a Little Rock Republican.

“What I’m encouraged about is that we are continuing to build a solution that works for Arkansas on this loose policy framework that we’ve been given. We’re rewriting the Affordable Care Act in Arkansas,” Sanders said.

But he said Medicaid expansion is still far from ready for a vote, a consensus echoed by others in the GOP.

“We’re continuing to operate in our new orbit,” he said.

Beebe said he isn’t rushing lawmakers to vote.

“I’m ready when they are ready, certainly before they get out of here,” Beebe said. “We continue to work with them and try not to rush them, as long as they get it done.”

He said it make take several bills.

“As long as they get it done in the normal course of business, it’s OK,” Information for this article was contributed by Sarah D. Wire of the Arkansas Democrat-Gazette.