Addressing the Medicaid Advisory Council today at the Capitol, Gov. Asa Hutchinson pledged to reduce the waiting list for a Medicaid waiver program that provides services offering home and community-based care for developmentally disabled children. Currently, around 2,600 families are stuck on the wait list, some of them for years. 

Hutchinson promised to cut that list in half within three years. His plan is to use savings and revenues that the state would accrue via his plan to use managed care companies to enact cost-saving reforms for certain high-cost populations in the traditional Medicaid program.  


Hutchinson stressed the importance of helping “those that would like to have an option for a more community setting instead of institutional care so that they can develop and utilize the capabilities that they have.”

A bit of background that must be noted: Funding to reduce or eliminate that wait list and provide services that families desperately need is available via the Affordable Care Act‘s Community First Choice Option, but Arkansas legislators have prioritized symbolic opposition to Obamacare and refused to seek that federal funding stream (certain current stakeholders, such as private nursing homes and human development centers, also oppose CFCO). 


With CFCO apparently at a political dead end, the state has been left scrambling to come up with funds to reduce the wait list. “The reason it hasn’t been addressed since 2007 is that there’s a huge cost to it,” Hutchinson said.

Providing the DD Medicaid waiver program costs around $50,000 per person per year. The state has to pay 30 percent of those costs, with the feds picking up the rest. 


Hutchinson hopes to put a dent in the wait list by taking advantage of funds the state is projected to save if it enacts a plan backed by the governor to implement managed care for portions of the Medicaid program. Hutchinson’s managed care plan projects to save $1.4 billion on net over five years (the feds pay for around 70 percent of traditional Medicaid costs, so that amounts to around $430 million in savings for the state). The governor says that his managed care plan is necessary given the potential for runaway cost growth in the traditional Medicaid program. For context: those projected savings are compared to a baseline of 5 percent Medicaid growth, so part of the aim here is to avoid a situation where Medicaid is growing faster than the state’s economy and cutting into other budget priorities — or requiring higher taxes than the governor would like. (In the past, the governor has tied his managed care plan to the private option Medicaid expansion, but the state’s consultant found that the Medicaid expansion saves the state budget money on net, even when the state has to start chipping in its full share of the costs.)

Hutchinson said today that he wants to devote some of the savings from his managed care plan to reduce the DD wait list. In particular, the governor would tap into a new revenue stream that his managed care plan would produce via assessing state premium taxes on the managed care companies. Any insurance company that sells a plan in the state has to pay a tax. Under the governor’s plan, the managed care companies would cover tens of thousands of people currently covered by traditional fee-for-service Medicaid. The insurance companies would pay a tax on all of those new customers, bringing in about $50 million per year to the state.  The governor promised to devote at least half of those revenues to reducing the DD wait list. Those funds would then be matched by the feds. 

“What I am presenting is a plan that has a funding mechanism that is uniquely funded by [my managed care plan],” Hutchinson said. 

Hutchinson pledged to work with the DD community on the process to reduce the waiting list. “What we need is more flexibility to work with the DD waiting list, we need to have a tiered level of service that can be incorporated as we meet their needs and put them in a community setting, and we need to be able to have some control of costs,” he said. Hutchinson’s language here is vague enough to raise questions about whether all of the families leaving the waiting list will have access to the full slate of benefits, and the DD community will surely demand more details on the governor’s plan.  


Legislators who oppose managed care have developed an alternative to the governor’s managed care plan, known as DiamondCare, which would implement similar cost-savings reforms but use a different mechanism that continued to pay providers directly on a fee for service basis. The DiamondCare backers say that their plan would also devote savings to reducing the DD wait list.

Because it does not use managed care companies, DiamondCare does not have the specific revenue stream of premium taxes that the governor’s plan has (which is probably one reason Hutchinson specified that the funds in his plan to reduce the waiting list were specifically coming from those premium taxes). However, there’s nothing stopping the DiamondCare team from committing some of the savings that their plan produces toward reducing the DD wait list. The issue is simply that according to projections, the DiamondCare plan produces less savings on net for the state (and the governor might argue that this would not leave enough revenue wiggle room to enact his plan). According to the state’s consultant, the DiamondCare plan would save a total of around $1 billion, around $400 million less than the governor’s managed care plan (in terms of actual state funds, that’s $317 million, or around $100 million less than the managed care plan). 

Support for special health care reporting made possible by the Arkansas Public Policy Panel.