In my post on yesterday’s Public Health meeting, I noted the irony of Tea Party Republicans howling that the semi-privatized health care expansion in Arkansas is more expensive than regular old Medicaid expansion would have been. Like a good liberal, the arch conservative Rep. John Payton even brought up the point that privatized schemes have to make room for profit: “On the one hand, a program pays for the medical needs of a population. On the other hand, the same population with the same medical needs pays a third party to cover those needs with a profit margin. How can that be budget neutral?”

It’s natural that the aginners would latch on to the report from the Government Accountability Office, since it’s critical of the process that approved the private option. But the crux of GAO’s argument hinges on whether it would have been cheaper to expand traditional Medicaid. Do the aginners support that? It’s rather remarkable to hear Tea Partiers explain that Medicaid is so cost effective that the private sector couldn’t possibly be cheaper. 


Back in 2013, when the private option first emerged, it was largely folks on the left making this critique. Here’s Aaron Carroll of the Incidental Economist in February of 2013

I guess some people assume progressives love Medicaid just because it’s government run. I support the expansion not because it’s un-private, but because it’s a cost-effective way to expand insurance coverage to the poor. Since so many conservatives think we can’t afford the cost of the Medicaid expansion, it seems odd to me that they’d be willing to spend more money to give them private insurance. I assumed that when they said we didn’t have the money for Obamacare, they meant we needed to spend less. I assumed that fiscal conservatives were worried about health care spending.

Here’s Paul Krugman in March of 2013


What you need to understand is that this is a double giveaway, both to the insurers and to the health care industry, because private insurers don’t have the government’s bargaining power. It is, bluntly, purely a matter of corporate welfare for the medical-industrial complex.

Of course, plenty of conservatives also made the critique that the private option would be costlier. But it’s an odd thing for politicians to focus on a cost comparison with a policy they oppose. If a left-of-center lawmaker — say Warwick Sabin — complained that Medicaid expansion would have been cheaper, the reason is that he is advocating for Medicaid expansion instead. The reason that Rep. Joe Farrer — who would never, ever vote for Medicaid expansion — is spending so much time on the comparison escapes me. 

Here’s the thing. As far as Arkansas policymaking goes, the point is moot. Don’t get me wrong, in terms of the private option as policy experiment, the question of whether the private option is more expensive than Medicaid expansion is vital. (And if it’s more costly, how much more? And could it bring other benefits that make the additional cost worth it?) It’s important in terms of federal budgeting, including the waiver process. It’s a huge question for other states considering whether to go this route. And perhaps years down the road, if the state’s political climate evolves, it’s important in informing Arkansas about whether to continue down this path.


But right now, in Arkansas? Traditional Medicaid expansion has zero chance of passing. None. It’s not happening. It’s not going to happen. That’s why we don’t have a definitive answer to this hypothetical scenario. It’s only hypothetical because the legislature rejected traditional Medicaid expansion. This alternative policy that might have been cheaper is irrelevant because it was never going to happen to begin with. We might as well be arguing over whether it would have been cheaper to deliver medical care via unicorns than going with the private option. In terms of large-scale, federally funded coverage expansions, the choices in Arkansas were private option or nothing (I always loved the candor of Rep. Bruce Westerman advocating for the “Do Nothing Option.”)

For the record, I believe that the gross cost of expanding coverage via the private option will likely cost the feds more than traditional Medicaid would have (the impact on the state budget is a more complicated question). I wrote as much at the time, lots and lots and lots and lots and lots of times. (As far as the DHS theory goes, I retain a healthy skepticism, but I’m open, and eager to see real data.) 

A commenter in my previous post pointed out that state officials like former Medicaid Director Andy Allison used to say the same thing, back in March of 2013. Fair enough, but I don’t think this is much of a gotcha moment. Almost everyone (well, with a few exceptions) assumed that the private option would be more costly when the policy first emerged. Then state officials did a close analysis with their actuaries and concluded otherwise. They developed a new theory, that remains controversial. “It just didn’t occur to folks,” Allison said at the time. “It didn’t occur to me or anyone else. It’s not a discussion we’ve had in the country because a pure buy-in like this really wasn’t imagined until the last couple of months.” Now, maybe you think DHS is full of it, that they were trying too hard to get to a YES, that coming up with that theory was all too convenient, etc. But that’s what happened, and they’ve stood behind their theory ever since, so it really is silly for Farrer to ask them when they “knew” Medicaid expansion would have been cheaper. 

In any case, we can debate hypotheticals until the cows come home, but at this point the experiment is afoot. Over the course of three years, we’ll have data to do state-by-state comparisons. We’ll see. It’s a very important policy question, but utterly irrelevant in the Arkansas General Assembly. 


In the mean time, hopefully the aginners’ newfound respect for the cost-effectiveness of big, publicly administered programs (versus costlier privatized schemes) will extend to debates outside of the “private option.”