Good news for the private option on the cost front. The data is in from the Department of Human Services for March and the trend for 2015 is continuing: the per-person costs of the private option are a hair lower than they were in 2014. This is a big deal because typically per capita health costs go up up up. Instead, private option per capita costs are basically flat in 2015 as compared to last year.
These flat per capita costs also mean that Arkansas is on pace to come in well under the budget targets set by the federal government over the three years of the federal Medicaid waiver used to enact the private option. Many opponents of the private option spent a lot of time shouting about costs in 2014, when the monthly costs were coming in above the budget targets. They have been utterly silent about the fact that costs have come in lower than expected for 2015.
The average per-person cost of the private option in March 2015 was $481.57, which includes the cost of the premium as well as payments the private option makes to cover cost-sharing for beneficiaries. That figure does not include the cost of “wraparound” services (services covered by the private option that aren’t included in the private plans, such as non-emergency medical transportation), which DHS has not yet provided for 2015 (I’ve made a request, should be coming soon). Historically, those have been around $6 per month, and there’s no reason to think this year will be any different. So call it, approximately, $487.50.
This isn’t a surprise at this point: that’s in line with the figures for January and February. Overall, the per-person, per-month costs of the private option have been about $487 in 2015. That’s compared to around $490 in 2014. (This makes sense: in a very happy surprise, premiums on the Arkansas Health Insurance Marketplace actually went down a bit this year.)
To get a sense of how significant that is, let’s take a look at the “budget neutrality caps.” The feds set per-person, per-month targets for each year, which Arkansas was not supposed to exceed as it conducted its “private option” experiment. The terms of the waiver state that Arkansas would technically be on the hook for any total, cumulative amount above the caps, over the course of three years. Because everyone assumed that premiums would go up, the cap for 2015 was almost 5 percent higher than the cap for 2014. In 2014, the per-person, per-month cap was $477.63. The state’s estimated average monthly per-person cost was around $490, so almost $13 over the cap (that adds up: multiplied by the number of beneficiaries each month, it’s nearly $20 million). In 2015? The per-person, per-month cap is $500.08, which means the private option is around $13 under the cap this year.
And this is important: the accounting is cumulative. If the per-persons costs are below the cap this year, it can make up for being above the cap last year. And because more people are enrolled in the private option in 2015 than there were in 2014, this year will in practice count more than last year. Got that? The “surplus” in ’15 counts more than the “deficit” in ’14 because there are now more beneficiaries. So the state racks up more dollars “under” the line than it racked up “over” the line in ’14. Therefore, barring some unforeseen catastrophe, Arkansas will have no trouble at all staying well under the budget set by the feds.
Now, back in 2014, when it appeared that Arkansas could be over budget set by the feds, critics of the private option were very, very excited. An right-wing advocacy group with a regular column on the Forbes website offered breathless, monthly reports predicting that the state was doomed to be on the hook for tens of millions. Sen. Bryan King held up a laminated sign, in a bit of DIY, performance-art protest at what he was convinced was an over-budget train wreck. Oddly, there have not been corresponding reports or notice of this good news from the aginner crowd. Go figure.
The budget caps were always a bit of a distraction ginned up by private option opponents. The bigger picture here is that, as expected, relatively flat premiums have translated into relatively flat per-person costs for the private option. Those costs are still higher than the state’s actuaries predicted back in 2013 when the policy was being debated for the first time, but appear to be significantly lower than doomsday fears of rapidly escalating costs.
Permanent postscript to all posts on private option costs (and another thing opponents never mention):
Both the 2014 per-person costs and the 2015 per-person costs are estimates which will be revised based on the true costs of care. There is a good chance that the over-the-cap costs of last year will actually be revised downwards. Keep an eye out for information about medical loss ration and cost-sharing reductions (see here for more on what that means), likely to be released some time in the next few months. Today’s data is good news for the private option’s 2015 costs. The next big piece of data to look for: The private option might actually cost less than reports have indicated for last year too.