We’ve devoted a lot of pixels in this space to explaining the bogus spin from Gov. Asa Hutchinson, who claims that the legislature has to come up with $835 million in savings in the traditional Medicaid program in order to pay for the private option (the state has to start pitching in 10 percent of the costs for the PO in 2020 and beyond). That’s pure baloney.

And, hey, so be it! The governor has two unrelated goals and he’s concluded that his best political strategy is to package them together. Sometimes spin is part of the political process. So let’s take a look at that strategy, at just why the governor is cooking up and selling this baloney. It may well be the best way for him to pull off two very heavy political lifts. But there are still reasons to find the governor’s slippery rhetoric troubling.


First, a recap of the governor’s spin: Hutchinson used fuzzy math to obscure the fact that the state’s own consultant found that the private option saves money on net, even in future years when the state has to pitch in; the governor basically pulled his target figures out of a hat, ignoring many details of the actual accounting; even if you use the governor’s fuzzy math, eliminating the private option would still create a hole in the budget, regardless of what the state does on traditional Medicaid; and again, even granting the governor’s fuzzy PO math, the legitimate policy questions about what to do on high-cost populations in traditional Medicaid — with dramatically more state money at stake than the PO — have nothing whatsoever to do with the fact that the governor wants to continue the private option. 

Hutchinson and his team aren’t dummies. They’re surely well aware that the arguments for reforming traditional Medicaid for high-cost populations — agree or disagree — have nothing to do with the PO. So why the spin?


The biggest issue is simply that the changes Hutchinson is seeking in the traditional Medicaid program — including reforms to the fee-for-service programs for the elderly, the severely disabled, and mental health — amounts to a Herculean task given the stakeholders involved. Previous efforts by DHS, including under the Beebe administration, have always been stymied in committee meetings packed with lobbyists. Note that the biggest-ticket item for reform — moving more long-term services and support from nursing-home institutions to more appropriate home- or community-based care — projects to save $500 million over five years. That alone would amount to more than half of Hutchinson’s target number, and the savings increase substantially over time. But that’s a lot of money that, by design, would be flowing away from nursing homes. One of the state’s most powerful lobbies, in other words, might have reason to worry about their bottom line. More generally, fee-for-service Medicaid with no care management at all — the status quo for these high-cost populations — may create bad incentives for providers, but provider groups may be resistant to reforms that could impact their own bottom lines. 

Keep in mind, we’re talking about spending that makes up three quarters of the traditional Medicaid program. There is a lot more money at stake in this debate than in the debate over the private option (and dramatically more money in terms of state budget funds). This isn’t a partisan or even ideological issue, where parties are lining up on either side. Instead, political decisions related to these populations have been dominated by stakeholders trying to protect their piece of the pie. That doesn’t always make for the best policy, and it makes an overhaul of the kind that the Stephen Group and Hutchinson envision a political minefield. 


The private option issue, and the creation of the task force, gave Hutchinson an opening to try to force legislative action in this difficult terrain. Linking his desired traditional Medicaid reforms to the private option is forcing the task force into a policy debate that most lawmakers would probably prefer not to have. By insisting that these changes are part of a big health care package — including an unrelated policy, the private option, with stakeholders of its own — Hutchinson is hoping to get a legislative stamp of approval and buy-in on policies that on their own face massive resistance in the legislative process.

And the governor is cleverly simplifying the goal by attaching a very specific target number ($835 million, which amounts to $250 million in state savings). He is disentangling himself altogether from the politically thorny question of how to achieve those savings and simply demanding that the legislature deliver that number. The figure itself is almost completely arbitrary, but that may be beside the point. It gives a hard number, subject to scoring from the Stephen Group and state agencies. And it gives a deadline (again, in fact arbitrary), since Hutchinson dubiously insists that the private option, up for vote in April, can only proceed if the legislature delivers this target. A hard number and a hard deadline is probably a good antidote to the interference-and-delay tactics that have faced previous efforts to initiate these types of reforms. It also demands that resistant stakeholders — like the nursing home lobby — step forward with clear and specific alternatives, subject to budget scoring. 

The other thing to keep in mind is that Hutchinson is trying to advance two goals, both steep political climbs, and linking them gives him leverage on each. 

On his desired changes to traditional Medicaid, he can put pressure on Democrats (and pro-private-option Republicans) to back controversial reforms by insisting that if he doesn’t get what he wants, the private option will suddenly end on January 1, 2017. He said just that, explicitly, at last month’s task force meeting. Perhaps he’s bluffing, but he’s made that threat bluntly enough to get everyone’s attention. (I’ll note that when Hutchinson wants tax cuts or spending elsewhere in his balanced budget, he doesn’t demand that a specific program face corresponding cuts to pay for them, so this tactic is unique to the private option.) 


Meanwhile, as he whips votes to try to continue the private option, Hutchinson can make a political pitch to conservative Republicans who campaigned against the PO. The changes he’s tacking on to the private option via his “Arkansas Works” proposal are pretty minor — big picture, he’s still continuing the private option. But a reduction in spending in the traditional Medicaid program of nearly a billion dollars over five years, saving the state $250 million? That’s not minor! Since many GOPs are convinced, despite the evidence, that the private option is a budget buster for the state, Hutchinson can make the case that he’s “paying for” it with these changes elsewhere in the Medicaid program. This has been the line that Sen. Jim Hendren — task force co-chair, former diehard opponent of the private option, and the governor’s nephew — has long embraced. If Hutchinson is selling the whole thing as a package, he can talk about cutting Medicaid spending even as he continues a multi-billion-dollar expansion of the program. He can say that the task force is actually offering something beyond re-branding. 

At least so far, I have to say, Hutchinson’s approach is working pretty well. The task force, including diehard opponents of the private option like Rep. David Meeks, Sen. John Cooper, etc., has endorsed the governor’s plan to continue the PO. And it’s also agreed to hit his savings target via reforms to the traditional Medicaid program, although they kicked the can on just how they would do it. Tip of the cap to the governor if can keep the private option going despite a rabidly anti-Obamacare legislature and pull off reforms to the current fee-for-service model for high-cost populations in traditional Medicaid program that eluded his predecessor. 

Baloney rhetoric is still baloney rhetoric, and we’re going to call it what it is. But looking ahead to the finish line there could be a lot to like. While Hutchinson is adding some bad policy tweaks to the private option, he’s keeping the coverage expansion in place, maintaining health insurance for more than 200,000 low-income residents, saving the state budget hundreds of millions of dollars, saving the hospitals hundreds of millions more in uncompensated care, and injecting billions of federal money into the state economy. And while we should reserve judgment until we see exactly how the traditional Medicaid savings are achieved, there’s a strong argument for moving away from the current fee-for-service model for high cost-populations in the ways that the Stephen Group report envisions: more care coordination, incentives for providers to provide cost-effective and high-quality care, and moving away from overreliance on nursing homes via “rebalancing.”

Given that, is it worth making a fuss over Hutchinson’s spin, however transparently nonsensical it might be? I think it’s important to expose the governor’s rhetorical trickery here for two reasons.

First, the way that the governor is constructing this argument is that the legislature needs to cut spending for the state’s neediest Medicaid patients in order to pay for coverage expansion to low-income adults. If you actually bought the governor’s spin, it would be easy to read that as taking money away from the elderly, the severely disabled, and those with ongoing mental health needs — and sending that money to working-age, non-disabled adults. As I’ve belabored elsewhere, that’s not what’s happening — the notion that Hutchinson’s desired Medicaid reforms are are happening in order to pay for the private option is a laughable canard. But it sure sounds like what’s happening if you listen to Hutchinson. He’s handing a phony talking point on a platter to those aginners desperate for any argument against the private option. They’ll say Hutchinson is taking money away from the truly needy and handing it over to welfare moochers.

This is the point that Rep. Charlie Collins made at last month’s meeting: if you buy what the governor is selling, you could easily conclude that if the legislature just scrapped the private option, there would be no need to tackle these difficult long-term questions in traditional Medicaid. That’s the logical corollary of Hutcinson’s claim that one thing is paying for the other. As Collins pointed out, that’s the opposite of the truth — in fact, the long-term cost questions for high-cost populations in Medicaid would be a major challenge regardless of the private option, and ending the private option would actually be counter-productive, blowing an additional hole in the budget. Hutchinson said that Collins was “exactly correct” but then moved on with the same narrative that Collins had shown to be false — and that the task force has at least publicly swallowed — that $835 million is needed as a pay-for. That might be a good leverage point to pressure Democrats committed to keeping the private option, but perpetuating this fantasy seems like an awfully risky strategy. If the private option is forcing lawmakers to cut money in traditional Medicaid, won’t that make wobbly Republicans (or even Democrats) sour on the private option? Isn’t Hutchinson writing his opponents a commercial, with the ledge slashing money for Granny in the nursing home or the developmentally disabled? Sen. Jason Rapert, a private option backer, has fretted about whether the governor is asking them to cut services from the state’s neediest patients in order to pay for the PO. Again, that’s not true — but that’s how Hutchinson is making his pitch. 

Meanwhile, if the only reason to reform these Medicaid services is to “pay for” the PO, a separate and highly controversial program, is that really a winning argument for the traditional Medicaid reforms? Keep in mind that the majority of the legislature is at least skeptical (or politically scared) of the private option to begin with.  

This brings me to the second concern I’d raise: Hutchinson’s “pay for” rhetoric and the hard number he’s demanded in savings from the legislature both serve to obscure the actual policy merits of reforming long-term services and support in the Medicaid program to begin with. It shifts the discussion from moving the program away from inefficiencies, cronyism, and bad incentives and toward care that is not just more cost-effective, but also higher quality. Consider the biggest ticket item in the Stephen Group report: moving more folks currently in nursing homes or similar institutions into home-or-community based care if that option is better for patients. That saves hundreds of millions of dollars but it’s not a benefit cut — that’s a better outcome for those beneficiaries.

But now Hutchinson is saying that he doesn’t particularly care how the savings are achieved, he just wants that number: $835 million over five years. He just wants cuts. And this isn’t just a matter of political rhetoric — it could bleed into the policy debate as well. Hutchinson has set out (completely arbitrary) savings targets for different provider groups and asked that lobbyists come up with their own plans to meet those targets (okay, he didn’t actually come out and say that about lobbyists, but that’s what’s coming!). Will nursing homes sign up for re-balancing that shifts patients away from their institutions? Or will they come up with uglier ways to meet their targets? All of a sudden, a worthy reform effort could drift into nasty, lobbyist-driven benefit cuts. And if the lobbyists do their job of protecting the relevant stakeholders, beneficiaries could be the ones to take the hit. 

The hard-number targets also may tend to undercut the best reforms in terms of really containing long-term costs. While the task force ostensibly can aim to beat the target, what will happen, in practice, when stakeholders are invited to produce their own plans? They will insist, loudly, that no further changes occur — regardless of the policy merits — once they’ve hit their number. Why should the nursing homes, to use our previous example, agree to further re-balancing if they’ve already met the goal that the governor pulled out of a hat for them? The fantasy that the state is pursuing Medicaid reforms because it needs to come up with $835 million in savings may actually create an artificial ceiling and curtail the long-term savings the state could achieve by simply seeking the best policy. And these groups will, presumably, game their changes to score well over the five-year target that the governor set up, regardless of what makes the most sense in the long run for cost-effective, high-quality care. This is a terrible way for the legislature to go about deciding the best course for the traditional Medicaid program.  

The Stephen Group, and the task force generally, has been focused over the last year on seeking the best policy — trying to make cost-effective reforms that are sustainable over the long run and maintain or improve high-quality care. The governor has now refocused the task force on hitting a completely arbitrary number. That risks moving the policy discussion away from the actual reasons to tackle reforms in the traditional Medicaid program and toward willy-nilly cuts for the sake of short-term bean counting. 

Ultimately, of course, the governor and the task force will be judged on outcomes, not process or rhetoric. This is how the sausage gets made. Arkansans will just have to hope we don’t wind up with baloney.