Meant to post on this yesterday: Iowa has gotten approval from the U.S. Department of Health and Human Services to pursue a version of Medicaid expansion that, like in Arkansas, will use Medicaid funds to purchase private health insurance plans for low-income residents in the state. 

There are two key differences in the Iowa approach (if you want more on the Iowa plan, don’t miss Georgetown University’s Joan Alker, who we previously interviewed on the Arkansas plan): 


1) Iowa will charge a small portion of the premium to the beneficiary, limited to 2 percent of income for people between 100-138 percent of the federal poverty level (that’s around $11,000 to $16,000 for an individual). That means that people above the poverty line may have to contribute between $19-$26 a month to the premium in order to gain coverage under the Iowa plan. Iowans may be able to reduce or eliminate this contribution if they participate in a wellness program. Republican Gov. Terry Branstad had hoped to charge small premiums all the way down to 50 percent of FPL (less than $6,000 for an individual), but the feds drew the line at the poverty line. By contrast, in Arkansas, all “private option” beneficiaries have their premiums fully paid for. 

2) Under the Arkansas “private option,” all beneficiaries are guaranteed all Medicaid services. Iowa was given a one-year waiver on non-emergency transportation, so at least in 2014, Iowans who sign up for private plans under the Medicaid expansion won’t be guaranteed that benefit. 


These are somewhat minor wrinkles, but they represent a further extension of possible approaches states can take in expanding the Medicaid program, and they might well draw the interest of the Republican legislators behind the Arkansas “private option.” It wouldn’t be a surprise to see requests for additional flexibility of this sort down the road. 

Arkansas was a first step, and we’re now seeing continued flexibility from the Obama administration as they try to pull more states into the Medicaid expansion. As the Washington Post’s Sarah Kliff has noted, “[i]n a weird way, Obamacare could end up changing the Medicaid program not just by making it bigger — but by making it more Republican, too.”


When the news about the Arkansas “private option” first came out, many wondered whether other red states (or states with Republican governors) might follow suit. That didn’t happen right away, but now there’s a trickle. In addition to Iowa, Michigan is awaiting federal approval on a privatized version of Medicaid, and Republican governors of Pennsylvania and Tennessee are currently negotiating with the Obama administration over their own “private option” plans. 

The underlying dynamic at play here is that Medicaid expansion is a very, very good deal for states, and in addition to expanding coverage to states which desperately need the help, it’s a policy with plenty of powerful constituencies behind it. It’s tough politically (to say nothing of the moral question) for governors to say no. Unfortunately, as in Arkansas, the politics of Obamacare are toxic for many lawmakers. Thanks to the creativity of Arkansas lawmakers and the flexibility of the Obama administration, the “private option” emerged as a way out of that trap, a way forward. Iowa has gone from a “no” to a “yes.” Will other states follow?

The approval of the Iowa plan this week means that coverage can start January 1. Almost 200,000 Iowans are expected to gain coverage over the next few years.