Arkansas’s unusual plan to expand Medicaid

By Sarah Kliff
The Washington Post, February 28, 2013

The Medicaid expansion has emboldened Republican governors to strike all sorts of deals with the Obama administration. They’re willing to make the program larger, the thinking tends to go, only if they can make it more conservative in the process.

The most interesting deal though may be coming out of a state with a Democratic governor: Arkansas. There, Gov. Mike Beebe must get 75 percent of his legislature to sign off on any funds necessary for the Medicaid expansion — a tough sell when Republicans control both the state House and Senate.

What the legislature could be sold on, they told the governor, was this: Using billions in federal Medicaid dollars to buy private health insurance coverage for the state’s lowest income populations.

To the surprise of many — Beebe included — Health and Human Services has given that plan the go-ahead.

Keep in mind, this is really different from what Florida did. There, Gov. Rick Scott received a waiver to move nearly all of the state Medicaid recipients into a Medicaid health plan, run by a private company, to manage their care.

What Arkansas is doing is using Medicaid dollars and sending people to the private health insurance exchanges, where they will shop for a plan like millions of other Americans expected to receive subsidies.

A  private insurance plan tends to be more expensive than Medicaid. The Congressional Budget Office estimates the difference between the two, for an individual, is $3,000.

Right now, that doesn’t matter for Arkansas: The federal government will pay 100 percent of the costs for the Medicaid expansion up until 2017. But after that, the match drops to 10 percent — and then the price tag for coverage does have an effect on the Arkansas budget.

I asked (Beebe spokesman Matt) DeCample why buy the more expensive health plans, which will ultimately cost their state, and the federal government, more money.

“These policies are going to be pricier than strictly through Medicaid expansion,” he replied, “But this is the kind of option that our legislature asked us to look for. Our primary hope is that, we can do this, and this is one way to pursue it.”…

Did I get this right? Health and Human Services has granted Arkansas a waiver to allow Medicaid dollars to be used to purchase private health plans in the state insurance exchange, even though they are much more expensive (and have more limited benefits than Medicaid). And they are doing this only so that state legislators can brag about using private insurers for a public program.