DHS DIRECTOR SELIG: "You have to look at the cost to the state." BRIAN CHILSON

The Health Reform Legislative Task Force is charged with charting a path forward for the state’s health care system, including the private option, the state’s unique version of Medicaid expansion. The subtext, of course, is that the task force must come up with changes to the private option that will make it palatable to Obamacare-hating Republicans in the legislature. The big policy questions in the coming months: will the complicated schemes being considered by the task force actually achieve their policy objectives? And will they end up costing the state more money?

The private option has cut the state’s uninsured rate in half, providing coverage for more than 200,000 Arkansans, and it projects to save hundreds of millions to the state budget, pump billions of federal dollars into the state economy, and save more than a billion dollars in uncompensated care costs for the state’s hospitals. None of that matters if a supermajority in the GOP-dominated legislature doesn’t agree to continue accepting the Obamacare money that makes the private option possible, which helps explain the suggested changes from the state’s consultant, the Stephen Group. The proposals — small premiums and cost-sharing for some beneficiaries, a six-month lockout for those who fail to pay, carrot-and-stick incentives for wellness and job training, an asset test, more frequent and intensive eligibility verification, a premium assistance program to keep people on employer-sponsored insurance — read like a laundry list of Republican talking points regarding the Medicaid program. 

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The problem is that when Republicans start tinkering with the Medicaid program, the end result is often more red tape (and new features that end up, budget-wise, in the red). This is a dynamic that has played out across the country: attempts to jam GOP hobby horses into the confines of Medicaid rules has tended to make the program more complicated, more administratively burdensome, and often more costly to the state. The Stephen Group, of course, is pitching all of its ideas as cost savers (or alternatively, as worth the costs in terms of goals like promoting “personal responsibility” or the “ladder of opportunity,” etc.). But it’s worth noting that all of the ideas listed above demand more bureaucratic complexity and additional front-end costs for the state to administer.  

We’ve already seen this play out in Arkansas, in fact, with the Health Independence Accounts — a scheme backed by Sen. David Sanders, Sen. Missy Irvin, and others to promote “consumerism” in private option beneficiaries. Administering the accounts has cost the state millions of dollars, and only a couple thousand beneficiaries are consistently participating in the program. The Stephen Group recommends ending the Independence Accounts program, and has pointed out to the task force the importance of considering administrative costs and challenges, even as it suggests new ideas that could run in to the same trouble. 

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The task force got another round of testimony this week from the Stephen Group and various state agencies and stakeholders, and John Selig, director of the Department of Human Services, offered some sage advice on this front: 

I think [the Stephen Group] has a number of interesting ideas. I think the governor is going to be interested in looking at which of those make sense. I will say, from the agency that has to implement it — and Mr. Stephen pointed this out also — each one of those recommendations you have to look at the potential cost-benefit. The issue for us with the Healthcare Independence Accounts — I think everybody thought they were a very good idea, but the cost versus what we actually got out of it is probably just too high. So one each of those recommendations that seem like a good idea, you have to look at the cost. 

“And you also have to look at the cost to the state,” Selig added. The actual cost of providing health coverage under the private option is fully paid for by the federal government (in future years, the state will have to chip in but the feds will still pay for 90 percent of those costs). But the state has to pay half of administrative costs for the private option; the feds only provide a 50-percent match on the admin side. And if the state creates entirely new programs that are not required by Medicaid — as the Stephen Group’s recommendations envision — that could mean that Arkansas would have to pay 100 percent of those administrative costs.

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“You really do have to look at it carefully,” Selig said, “and really make sure that the good idea also makes sense in practice.”

Selig hinted that the governor is well aware of this issue. Responding to questions from Irvin about potentially creating certain wellness requirements or incentives for beneficiaries, Selig said, “I know one of the concerns of the governor was, he doesn’t want to create a bunch of incentives that also cost the state a lot more money.”  

Of course, the legislature might decide that a given policy objective is worth the cost. A wellness program that actually improved wellness might be worth paying for. But many of the ideas currently under consideration are at best hazy in terms of the policy value that they would provide. Arkansas lawmakers might want to take some “personal responsibility” of their own and recognize that their pet ideas come with a price tag.