Could the private option be in political trouble even if Gov. Asa Hutchinson gets his requested conservative tweaks from the federal government? The mood at the Capitol has turned surprisingly bearish — or at least uncertain — on the PO’s future since the governor presented the framework for his rebranded “Arkansas Works” to the Health Reform Legislative Task Force last month. 

Hutchinson and his team met with federal officials yesterday to negotiate an agreement on the future of the private option, the state’s unique version of Medicaid expansion, which Hutchinson would like to adorn with GOP-friendly bells and whistles. I did a quick roundup on the lay of the land for Kaiser Health News yesterday. It’s familiar territory for those following the debate closely but I wanted to highlight this from Sen. Jim Hendren


“My read on the politics is that if the federal government does not consider out-of-the-box and unprecedented measures, there’s a high likelihood that it’s not going to have the political support to get through the Arkansas legislature,” warned Republican state Sen. Jim Hendren, chairman of the state’s health reform task force (and the governor’s nephew).

Now, most Capitol observers, myself included, have been operating under the assumption that once Hutchinson hammered out an agreement with the feds, continuation of the private option was more or less a done deal. After all, Hutchinson snagged easy supermajorities in 2015 to continue the PO for two years and set up the task force to figure out what to do next. And the million-dollar consultant hired by the task force recommended … continuing the private option! Indeed, the task force explained that getting rid of the policy would cost the state budget more than $400 million between 2017 and 2021, and cost hospitals more than a billion dollars in uncompensated care expenses over the same period. The task force, which includes a number of Republicans who vehemently opposed the private option, has seemed generally supportive of the governor’s “Arkansas Works” plan. Diehard PO opponents like Rep. David Meeks, Rep. Joe Farrer, and Sen. John Cooper have been receptive and positive. The PO started to seem downright uncontroversial on the task force, with the drama switching to the question of managed care in the traditional Medicaid program, a separate issue.

And, of course, the political nightmare of snatching health insurance from 250,000 Arkansans makes it a lot easier to talk about repealing the private option than to actually do it — as we are seeing in Kentucky, with a newly elected Tea Party governor flipping on campaign promises and planning his own continuation of the Medicaid expansion with conservative tweaks. 


But multiple sources at the Capitol told me that the governor’s office is counting votes now and that the margins are incredibly tight. Technically, the enabling legislation for “Arkansas Works” could pass with a simple majority, but the appropriation still needs an annual supermajority, and that’s the threshold the governor’s team is demanding to move forward. While most task force members have been positive about “Arkansas Works,” Sen. Terry Rice recently quit in protest because of his opposition to continuing the coverage expansion. If the aginners have been sleeping lately, they may be about to wake up. 

Hendren argued that the needed supermajorities will be as hard to come by next April, when the legislature will meet for a special session, just as they were in the knock-down-drag-out-fights of 2013 and 2014. And maybe even harder — Hendren believes that there is a real possibility that the program will end. 


“[The governor] is well aware of the fact that this is a hard lift,” he told me. “I can just tell you right now that due partly to the fact that we’ve got presidential elections in full swing, we’ve got Congress repealing Obamacare and two or three of the top presidential contenders all saying they’re going to repeal it, we’ve got primaries going — all of these things are driving toward the fact that it’s a tougher environment now than it was a year ago.”

Hendren himself is a massively important vote. He was one of the most outspoken opponents of the private option in 2013 and 2014, but led the effort in 2015 by Hutchinson (his uncle) to keep the policy in place and establish the task force. The margins are so tight in the Senate, where just nine members can hold up the appropriation, that the math becomes tougher if the private option loses anyone. But Hendren would be an especially tough blow, since he has been a leader on the issue and has been the public face of lawmakers who opposed the private option but have backed Hutchinson’s efforts to develop an alternative that keeps the coverage expansion in place. 

I asked Hendren whether he supported the general framework that the governor brought to Washington (Hutchinson has outlined his policy asks both in testimony to the task force and in a letter to federal Health and Human Services Secretary Sylvia Burwell)

“For me it’s still an open question,” he said. He liked the direction that the governor was going, he said, but it will come down to details. What are the terms of the governor’s plan to make more use of employer-sponsored insurance (ESI) plan? What will be the consequences if beneficiaries fail to live up to the plan’s “personal responsibility” expectations? 


Talking to Hendren, the truth is that a lot of what he wants is, well, wildly unrealistic in terms of what the Obama administration will approve. He gets that: 

Does that mean it’s the only thing I would accept? No, it doesn’t. Somewhere between complete flexibility to do whatever the state determines is in the best interests of its citizens on one end and the federal government saying you will comply with every stipulation of the ACA and every regulation under CMS on the other hand, somewhere in there is a continuum. Whether you can find a spot in there where you can get 75 percent of the legislature is the challenge. 

I pressed Hendren to describe specific issues that were make-or-break with him or lines in the sand but he demurred, and frankly I don’t blame him. Waiver agreements rarely come out precisely how they came in when leaders arrive to negotiate. The details could shift at the margins. 

“I was very clear at beginning of task force, I would encourage all members to avoid the tendency to make lines in the sand or bold statements about positions before they even know what the question is,” he said. “I will tell you that as far as me in principle, I think I’ve already laid out the fact that if we have a program that discourages work and discourages personal responsibility and discourages the private sector from providing insurance — in other words, small companies like mine that are trying to to do the right thing and make it an affordable place for people to have health insurance — if we have policy that discourages that, that’s tough for me to support.”

This last point could spell trouble. Right now, if someone gets offered insurance at their job but also qualifies for the private option, they can just opt out of ESI and take the cheaper private option plan. Hendren wants Medicaid-eligible employees who get offered health insurance by their jobs to stay on ESI plans rather than going to the private option (he’s arguing against interest here — in addition to costing the potential beneficiary more because of the employee contribution, that would also cost a business owner like Hendren more because of the employer contribution). But the governor isn’t even asking for this. The only way the feds will agree to the scheme is if Medicaid picks up the tab for any difference in premiums/cost-sharing for the beneficiary, as well as covering any Medicaid benefits not covered by the plan. Precisely that is spelled out in Hutchinson’s proposed framework. If that’s a deal-breaker for Hendren, you might as well consider the deal broken. 

“The federal government is going to have to decide whether or not they’re going to bend some on the requirements of the Affordable Care Act,” he said. And there’s no question that the federal government will bend plenty — the question is whether they’ll bend enough to satisfy the Arkansas legislature. Again, here’s Hendren: 

It is clear that there will need to be changes or the program will go away. The question is whether or not the changes will be significant enough to satisfy those who don’t support Medicaid expansion—and if so, will those changes alienate those on the left who support Medicaid expansion with really no preconditions. That’s where we find ourselves. 

I asked Hendren whether there was the political appetite to approve the governor’s plan, which for all its substantive changes still uses Obamacare money to fund a coverage expansion.

It is a big hurdle. There is no question about the fact that without the ACA or Obamacare, there would be no Medicaid expansion and we would not even be having this discussion. So does that mean that it’s DOA with a majority of the Republicans or conservatives? I wouldn’t say DOA. I would say it’s dead to several and I would say that — you know, you can call them Obamacare dollars, you can call them whatever you want, but at the end of the day they’re tax dollars and at the end of the day to some of us who are concerned about the debt and the deficit, they’re adding to a problem that we have in fiscal irresonpsibiltiy at the federal level. There’s no question that that weighs in to the decision.

Now obviously you can take that to an extreme and say we’re not going to take any federal dollars if we’re worried about the deficit. So again somewhere between the realm of extreme and irrational and practical lies where this thing’s gonna fall down.

I also realize that you don’t turn ships around as fast as you turn a fighter aircraft around and sometimes it takes a little time to change direction, so if that means we don’t get everything we want today, the question is can we put it on a path that begins to change the direction. That’s the governor’s task is to say maybe it’s not everything we want , maybe it’s dollars that all of us would prefer be used to pay down the deficit, but this is at least moving us back in the right direction. We’ll see if that works or not. 

Of course, some measure of bluster is inevitable at this point. Republicans want to get as much as they can from the feds, and many are in the middle of primary fights.

The elephant in the room when it comes to any potential private option repeal is the impact on the state budget. Getting rid of the policy would blow a hole in the budget — again, $400 million over five years, according to the state’s consultant. The governor is now preparing two budgets — one with the continuation of the private option and one without. The difference between the two budgets will be significant, with the latter including painful cuts. 

“I am fully aware of the pain that is going to come to the budget,” Hendren said. “Perhaps more than some of the others down there. The savings that we’ve generated from this, that’s already been built into the soup, that’s already been built into the budget and spent. If we go back, I understand the notion that transitioning those fifty to seventy thousand people back on to traditional Medicaid ,where we have the 30 percent match, is going to be a hit on our general revenue stream.”


Hendren noted the “screaming and wailing” when they had to come up with just $10 million in cuts toward the end of last session. 

“The thought of hard cuts do not scare me,” he said. “And I am prepared to take the political beating that comes from it because I’ve been pretty consistent in my twenty years in politics. … I’m prepared to do the hard things. But I don’t think some people understand that it’s going to be hard. There’s going to be pain. There’s going to be college presidents, and superintendents and city mayors and councilmen, and there’s going to be a lot of people who are upset if we end up having to make those kinds of cuts to budget. So there’s no question that the stakes are high and the consequences in either direction will be monumental.”