The Health Reform Legislative Task Force is set to make a decision on hiring a consultant later today, after hearing from the last of four finalists this afternoon.
Here’s the big puzzle for the task force: on the one hand, Gov. Asa Hutchinson has said that it’s “essential” to continue coverage for the more than 200,000 Arkansans now covered by the private option; on the other hand, Hutchinson has said that the state may have to “swallow hard” and abandon billions in federal money paying for that coverage.
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You don’t really need to hire a million-dollar consultant to understand that you can’t have one without the other. Hutchinson is doing his best to thread the needle but his comments really make no sense. If the task force doesn’t know that already, they are going to run into the budget realities in a hurry. The task force has lots of little choices to make (policy design, additional programs, additional waivers) but one big one — either learn to love Obama money or get ready to send out hundreds of thousands of cancellation letters.
Here is the budget math: currently, federal funds available via Obamacare pay for the entire tab on the private option. Even in 2017, when the state has to start picking up a small portion of the tab, the feds will be paying 95 percent of the tab. That will eventually fall to 90 percent in 2020, which is still an unusually good deal. To understand why, keep in mind that the federal matching rate for the existing Medicaid program (the folks that were covered without Medicaid expansion) was 70-30 – the feds picked up 70 percent of the tab and the state was on the hook for 30 percent. If the state says no to Medicaid expansion, the generous expansion 90-10 matching rates go away with it. That means that in 2017, if the state attempted to cover even a subset of the private option population, they would get less federal help and coverage would become six times more expensive for Arkansas. By 2020 it would still be three times more expensive. The result: You would end up covering less people for more state money. That would be a political and policy disaster, with the only upside that the legislature could boast of sticking a thumb in the eye of Obama (a seemingly piddly accomplishment given that he will be out of office by then).
It’s worth highlighting this point if lawmakers are hoping to cover a portion of the current population (Rep. David Meeks, for example, has said he would support the private option if it only covered folks up to the poverty line, instead of up to 138 percent of the federal poverty level, a strange line in the sand given that the 80 percent of beneficiaries are below the poverty line). The feds have been crystal clear that the generous expansion match rates only apply if a state expands eligibility all the way up to 138 percent. If, for example, the state wanted to focus on the medically needy only (the 10 percent of private option beneficiaries with the greatest needs for care), the price tag for covering them under Medicaid would be three times as expensive for Arkansas — for the priciest patients — if the state nixes expansion.
All of this assumes that in the wake of killing the private option, the state would still depend on some Medicaid funds. If legislators really want to craft an “Arkansas solution” with maximum flexibility to latch conservative hobby horses onto health care policy, they could always go it alone. The problem, as you can probably guess, is that means the state would be on the hook for everything. Even under a skimpy program that offered less benefits to less people, this would be orders of magnitude more costly for the state than a 10 percent match on Medicaid—blowing an impossible hole in the Arkansas budget. Again: the state would pay more money to cover less people. And as we are seeing now in Florida, the feds are not going to chip in to stop the bleeding when uncompensated care costs skyrocket for hospitals if expansion goes away. The state — or the hospitals — would suddenly be facing a budget dilemma.
You often hear legislators whine about the federal requirements that come along with accepting federal money. But the level of coverage that Arkansas has achieved – cutting the state’s rate of uninsurance in half through the first half of 2014, and probably even further since – was only possible with that federal money. If the state wants to do things its own way, it can use always use its own money! That just means it would be prohibitively expensive to accomplish even a fraction of what the state is able to do with the feds’ help. It’s like a kid getting a car paid for and complaining if there are some rules attached.
The other thing to bear in mind is that private option opponents often mention the gross costs of the ten percent portion the state will have to start paying in 2020 and beyond, without mentioning the offsetting revenues and savings that will substantially reduce the net costs — premium taxes on insurance plans sold, state taxes on the federal money spent, savings in state spending on uncompensated care, and savings from certain beneficiaries covered under old Medicaid who get the higher match rate under expansion. And of course that’s to say nothing of the economic impact of billions of federal dollars coming in to the state (there’s a reason Chamber of Commerce types like the private option).
This is a long and wonky way of making a pretty obvious point: When the feds offer to pour billions of dollars into a state economy, covering 90 percent of the cost of a useful program that helps the state’s citizens and communities, it’s probably a pretty good deal for the state! This is uncontroversial in all sorts of other situations for state legislators, but on this issue we’re dealing with the O word.
We have had detailed, policy-heavy, contentious, interminable debates on this topic for two years. Despite occasional promises from PO opponents that there was a better solution, they never, ever, ever offered a specific, affordable alternative. That’s because there is no magic plan to cover these folks while refusing the Obamacare money. Either use some version of Medicaid expansion (the private option plus whatever conservative wrinkles the task force comes up with) or end health insurance coverage for hundreds of thousands of the state’s poorest citizens. There is no third choice.