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How the private option flipped the Medicaid expansion debate 

If you see a crowd at the Capitol, it usually means something controversial is about to happen. Maybe there's an abortion bill in committee. Or maybe one prominent lawmaker is having a spat with another and wants to talk some trash to the media.

But late in the afternoon on Feb. 26, the swarm of journalists, cameramen, lobbyists and hangers-on gathered outside of the governor's conference room were there to get some nitty-gritty policy details. Behind the conference-room doors, the governor was talking to about 20 legislators. He had just returned from Washington, where he had met with U.S. Secretary of Health and Human Services Kathleen Sebelius to ask whether the federal government would grant the state some flexibility in tackling Medicaid expansion. Now he was relaying the results to local lawmakers.

The debate over Medicaid expansion had cycled around and around and seemed to be going nowhere. The governor wanted to move forward, but he needed three-fourths approval from the legislature, which was controlled by Republicans dead set against it.

As legislators and state officials slowly began to exit the conference room, there was a bit of confusion. The news from Washington was good, that much was clear. But the details seemed so different from everything that had been publicly discussed so far that reporters weren't quite sure what had happened.

Finally Gov. Mike Beebe ambled out of the conference room to meet the press, with the satisfied look he sometimes gets when he is very pleased with what he is about to say. He let the scrum gather around him, and he smiled. At the tail end of a long career, he was enjoying himself. What had the feds offered? "Basically," he said, "they've agreed to give us about everything we've asked for."

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Last week, the governor signed into law bills that accept federal money through the Affordable Care Act (ACA) to expand healthcare coverage to low-income people in Arkansas.

You'd be forgiven if your eyes have glazed over from time to time over the course of this long and often confusing debate. Healthcare reform is a subject that can get complicated quickly, with a lot of acronyms and numbers and jargon.

It also has a real impact on real people's lives. One in four Arkansans between the ages of 19 and 64 does not have health insurance; more than 200,000 of the state's citizens will be gaining coverage from expansion. The decision will also have an outsized impact on the state's fiscal future — the state will have hundreds of millions more in its coffers because of expansion, along with the economic impact of billions in federal spending in Arkansas. Whatever your position, it was one of the biggest questions before the legislature in years, if not decades.

That question was turned on its head by the "private option" (that's the common nickname for the new framework that HHS gave Arkansas the go-ahead to pursue). The private option achieves expansion of coverage using private insurance companies on the healthcare exchange instead of Medicaid. This new approach has gotten Arkansas national attention, representing the possibility of a third way for states trying to decide whether to go forward with expansion or stick with the status quo. Here at home, it turned Republicans who had been ferocious critics of the Affordable Care Act into advocates of using billions of dollars in government assistance to help the poor secure healthcare access. Without the private option, Medicaid expansion was all but dead in Arkansas. Now the state may well be the only one in Dixie to do right by its people.

With states across the country filing into "yes" or "no" camps on expansion, how did Arkansas forge a different path? It took a group of clever and obstinate young Republican legislators who refused to go along with Medicaid expansion but weren't ready to close the door on other ideas. They helped force a crafty veteran Democratic governor who was eager to go forward with expansion to consider alternative approaches. Throw in tireless and creative state health officials who happened to have a cozy relationship with their federal counterparts. Probably some luck. And, among everyone involved, it took a slightly crazy, seemingly unjustified optimism that somehow a solution was possible. You might even say — at the risk of conjuring up Obama, a name guaranteed to derail any political discussion in Arkansas — that it took some hope.

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During the 2012 election cycle, Republicans in Arkansas were fired up. For one thing, it looked like they were going to be able to take control of the legislature after being out of power for more than a century. For another, they were hopeful that Republicans nationally could vote out President Obama and repeal his healthcare law, a man and a piece of legislation that had inspired incredible fury among conservative Arkansans. In fact, Obama and taking back the Arkansas legislature were explicitly tied together — a common campaign theme was fighting Obama and Obamacare from Little Rock. They wanted to take the country back.

Well, they got Arkansas, but not the country. Obama was re-elected and the president's healthcare reform act was the law of the land, with many of its key components set to go into effect in 2014.

Meanwhile, the Supreme Court threw everyone a curveball with a ruling in June that upheld the law but allowed states to decide whether or not to expand Medicaid (see sidebar for a fuller explanation). Beebe announced support for expansion in September, but he couldn't move ahead unilaterally — he needed a supermajority of the General Assembly to approve.

A coalition of powerful interests in the state — particularly hospitals — began lining up in support of expansion. The Department of Human Services released an analysis on the fiscal impact, projecting hundreds of millions in savings to the state's bottom line, with the savings continuing even as the match rate went down to 90 percent. The RAND Corp. released a study projecting that the state would add thousands of jobs, save thousands of lives and add a half-billion dollars annually in economic stimulus to the state GDP.

None of it seemed to matter to Arkansas Republicans. They tried out lots of arguments against expansion, some coherent, some not. For many, given the tone of the campaign ("our view is that supporting Medicaid expansion is really embracing President Obama's law," as one party leader put it), the politics surrounding the healthcare law were toxic. "Coming into the session, we had a lot of people that had put themselves into a position where they're fighting Obamacare, whatever that means," Beebe spokesman Matt DeCample said.

In his state of the state speech, Beebe gave the hard sell on expansion. He made the humanitarian case for the working poor, the fiscal case for the state, and the economic case for hospitals, jobs, and attracting small businesses. "The benefits, costs and insurance mandates that you like or dislike about the law many call Obamacare will continue going into effect this year and the next," he said. The legislature had the opportunity to do the right thing for the state, Beebe said. "The money is available, it's our decision whether to use it," he said. Listing all of expansion's benefits, he said, "We just have to say yes." It was a strong speech, generally well received, and it made the substantive case for Medicaid expansion in starkly political terms.

Some key Republicans in the audience, however, felt that Beebe was missing the mark. For them, all of the talk of "Obamacare" was beside the point, even condescending. Sen. Jonathan Dismang (R-Beebe), Sen. David Sanders (R-Little Rock) and Rep. John Burris (R-Harrison) had done their homework on healthcare policy, and they had a chip on their shoulders. They were infuriated when people — whether it was fellow lawmakers, hospital administrators, or this newspaper — called expansion a "no-brainer." They heard Beebe's line "we just have to say yes" as insulting, suggesting an abdication of their responsibility as legislators.

They understood that real harm was coming to the state if no action at all was taken. But they also believed that they had a principled objection to Medicaid expansion that was more thoughtful and nuanced than simple anti-Obamacare partisanship.

Sanders recalls a conversation he had with an administration official a few weeks before Beebe's speech: "I said, understand, our opposition to Medicaid expansion is not some crazy, right-wing, 'there's a Muslim Kenyan socialist in the White House' thing. That's not us. We don't think this works for Arkansas."

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We cannot know for sure what would have happened in a counterfactual, but it's highly likely that without the "private option," Medicaid expansion would have been impossible. And the "private option" came to be in large part because of pushback from those three key Republicans.

Dismang, a jovial backslapper by disposition, is a hard-handed negotiator; he faced political pressure with White County Medical Center in his district, but was one of the most forceful lawmakers in the early going tangling with the stakeholders pushing for Medicaid expansion. He's viewed as one of the legislature's hardest workers and has been open to pragmatic problem-solving despite his consistently hard-right political orientation. Back in November, when many in his party were still relying on ready-made slogans, Dismang was researching the ins and outs of the Affordable Care Act. His comfort getting into the weeds of policy detail established him as a key voice of Republican opposition to expansion even before the session started.

Burris is a 27-year-old political wunderkind who first ran for office in 2008 at the suggestion of Sen. Michael Lamoureux (R-Russellville), who happened to see him at the drive-thru at Wendy's where Burris, then a College Republican at Arkansas Tech, was working as a manager. He was elected as the youngest legislator in decades and has devoted himself to the General Assembly full-time ever since. He's quick on his feet, with a sharp, biting sense of humor, but if someone like Beebe was looking for compromise, Burris was probably not the first person he thought of. He is an aggressive, bullheaded legislator who likes to pick fights with liberals and has the talent to spar with the best. He once asked why the media portrayed him as angry (Democrat-Gazette columnist John Brummett rarely mentions his name without including the apt "pugnacious" as modifier). A reporter suggested that it looked like he wanted to punch someone during committee meetings. He responded that people should stop saying things that made him want to punch someone.

Sanders practiced his policy chops as a conservative commentator for local television and print media before going into politics. He inherited the passion for right-wing ideas of his hero William F. Buckley, and also the cosmopolitan flair — his dapper getups even feature matching socks for his colorful collars and pocket hankies. He digests material from conservative blogs and think tanks like a teenager plowing through the "Twilight" series, and is passionate to the point of obsession about nearly every big-picture conservative reform idea ever. He speaks in manic bursts and thinks in very sweeping, very long-range, very ambitious terms ("We are just getting started in a brave new world of policy in the United States").

All of them are smart and a little bit wonky. All of them are politically combative. All of them are extremely conservative. And all of them — if you take them at their word — were never, ever going to vote for full expansion of the traditional Medicaid program.

In the first few months after the election, legislators were met with a barrage of arguments from key political insiders, hospitals, and the business community. While the makeup of the legislature — and at least in some districts, the electorate — was ideologically opposed, the major interests in the state were united in support of Medicaid expansion. Because the fiscal case for the state was so strong, many expansion proponents felt that once the facts were digested, they would win the argument. In the final analysis, was the legislature really prepared to turn down billions in federal stimulus money?

But Burris, Dismang and Sanders believed that they had as good a handle on the facts as anyone, and they were absolutely prepared to turn down the feds' offer. They were true believers that the Medicaid program simply didn't work, and from their perspective, expansion would only exacerbate the problems. Meanwhile, any talk of "free money" from the federal government was anathema to conservative dogma.

When Beebe met with a group of legislators from both parties on Feb. 11, the meeting began with much the same dynamic as the state of the state — the governor making the hard sell, Republicans crossing their arms. Republicans saw it as an opportunity, as Burris puts it, to say, "No, and here's why." From their perspective, this meeting was the moment when the governor understood that traditional Medicaid expansion simply wasn't on the table (expansion proponents view it differently, saying they were not ready to give up hope if that was the only way forward). In any case, hearing the Republican arguments also represented an opportunity for Beebe and his team. His staff took notes on their questions and concerns. They knew what Republicans were saying no to. Was there anything they would say yes to?

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If you've ever heard a conservative rail against Medicaid, or any public program for the poor, you'll be familiar with the complaints lodged by Burris, Dismang and Sanders. They think the program is rife with waste and inefficiency; they think it incentivizes the wrong behavior among beneficiaries; they think it will inevitably lead to runaway costs; they think it gobbles up taxpayer money while delivering low-quality service. One can argue with them until the cows come home on these points, but once you realize how deeply held their worldview is, it becomes clear why Medicaid expansion as traditionally conceived was always going to be a nearly impossible sell to this crew.

But this was also the key to unlocking a third way in Arkansas: This group of Republicans turned out to be much more open to government spending to increase healthcare access if it came as part of a transition from a public program to a more market-based approach using private companies. Liberals were motivated by the expansion part of Medicaid expansion — access to healthcare for the poor. If they could take out the Medicaid part, Burris, Dismang and Sanders were willing to be partners.

This isn't really so surprising. Before Obamacare got labeled socialism, healthcare exchange marketplaces were once considered a conservative alternative approach to expanding healthcare coverage (made famous by Republican Mitt Romney when he was governor of Massachusetts). As Sanders is fond of mentioning, ideas about "premium support" have often come from the Republican side. Congress had actually considered an exchange-based approach for expansion in the Affordable Care Act itself before rejecting it as too expensive (private premiums are typically costlier than Medicaid).

Though Sanders and company are undoubtedly ideologues, they are not entirely rigid. You might call them pragmatic federalists — they weren't willing to just accept the federal policy on Medicaid expansion, but they were willing to negotiate (in contrast to the middle-finger federalism of someone like Louisiana Gov. Bobby Jindal, who was content to simply say no). They also saw an opportunity to put what they viewed as a conservative stamp on healthcare reform that is inevitably coming down the pipeline. "Republicans have always been timid to play in the world of social welfare policy," Sanders said. "They're always quick to throw rocks at it. They will not go in and get their hands dirty." For Sanders and company, simply walking away amounted to ceding policy territory to liberals whose ideas they were likely to loathe.

That's not to say that they were immediately looking for a deal. One of the many ironies in the development of the "private option" is that its roots come not from compromise proposals but from arguments against Medicaid expansion. As Burris points out, if you are sharpening your policy arguments about why you believe something is a bad idea, it's only natural to begin to start thinking about what should be done instead.

In the first Senate committee meeting on expansion, a heated confrontation between Dismang and an administration official ended up opening the door to more creative thinking. Dismang focused on a quirk in the ACA that came about after the Supreme Court's ruling: In states that opted for expansion, people between 100 to 138 percent of the federal poverty level would be covered under Medicaid; in states that didn't expand, they would instead be eligible to buy subsidized insurance on the exchange. Dismang argued that people in the 100-138 group would want to be able to buy subsidized private insurance and that by expanding, the state would be taking that "right" away.

Beebe's team saw an opening — if Republicans wanted the 100-138 group to go on the exchange, could that be part of a middle-ground deal on expansion? The problem was that the feds had been clear that the obvious solution — expanding Medicaid partially, but not all the way to 138 — was legally impossible if states wanted the ACA's match rates. Any deal would need federal approval. Beebe announced that he would meet with Sebelius when he was in D.C. for the governor's conference in late February, and that he was willing to ask for any form of flexibility that would still achieve the underlying goals of expansion.

Senate President Pro Tem Michael Lamoureux (R-Russellville) speculated that Beebe might be "uniquely situated to get a little extra negotiation power for our state" but it was hard to know why this would be the case. If the feds gave Arkansas a deal, they'd have to give all states a deal.

In the weeks before the meeting with Sebelius, a few signs started trickling in from other states that perhaps there was a little wiggle room after all. No one was more tapped in to these developments than Arkansas Medicaid Director Andy Allison, a whip-smart health economist who had previously worked as a Medicaid director in Kansas (as well as a healthcare researcher for the state under then-Gov. Sebelius) and had spent three years as a Medicaid budget analyst at the Office of Management and Budget. Allison had a passion for innovative healthcare policies and few in the country had a better handle on both existing Medicaid research and the spectrum of what might be legally and practically doable.

He also had connections. He served as president of the National Association of Medicaid Directors in 2012, an organization that he helped found. He was in constant communication with other state Medicaid directors and had developed a close working relationship with key officials at the Center for Medicare & Medicaid Services (CMS). In communicating with the feds, Allison began to realize there might be flexibility for some kind of privatized approach. In the week before the meeting in D.C., emails between DHS officials and members of Beebe's team expressed hope for a "grand bargain" sending some of the expansion pool to the exchange.

The day before they left, the governor and DHS officials met with key Republican lawmakers to try to hammer out just what their request to Sebelius would be. Lamoureux remembers Burris being aggressive at the meeting ("not looking for common ground, looking for John Burris ground"), but noticed a change in the governor and DHS. Burris and company were shooting for the moon; now the administration was ready to bend. "The governor is a smart negotiator," Lamoureux says. "At that point, it was looking like we were heading toward nothing. At some point in his mind, he decided to take a different path." The yes-or-no debate had shifted completely to exploring the boundaries of what might be possible.

The day before, the governor of Florida had come out for expansion — Florida's situation wasn't analogous to Arkansas's but it would use a privatized approach, which seemed like a crack in the door. Allison had been in touch with Ohio's Medicaid director, and he described some of what the state hoped to eventually do with moving people on to the exchange. These were long-term goals, not yet public, but the Republicans in the room grew excited as Allison discussed the concept of covering people through the exchange, even moving some in the existing Medicaid program to private plans.

As he got in to the details, Burris turned around. "That's not Medicaid expansion at all," he said.

The room got quiet and the governor leaned forward. "Talk to me," he said.

Over the course of that meeting, and a second meeting immediately thereafter in Dismang's office, the lawmakers and officials hammered out the details of their big ask to the feds. It was bigger than anyone could have predicted the week before: Could they achieve Medicaid expansion without expanding the state's traditional Medicaid program, entirely through private companies on the exchange?

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When the governor returned with the news from the feds, it was like "pushing the re-set button," as Speaker of the House Davy Carter (R-Cabot) put it. Immediately after the meeting, Carter rushed to cancel a contract with an outside consultant that Republicans had planned to hire to evaluate the costs of traditional Medicaid expansion. This new option still amounted to accepting federal money to provide health insurance to the poor, but the means to do so had different implications for providers, carriers, beneficiaries and the healthcare system as a whole. After months of contentious debate, it was time to debate a new policy, with only about six weeks left in the session.

With the private option in play, the old sparring partners became new allies. The governor's office, DHS staff, and Surgeon General Joe Thompson worked closely with Burris, Dismang and Sanders to craft the legislation. "We all felt like we were pulling in the same direction at that point," DHS director John Selig said.

If Burris, Dismang and Sanders were the foot soldiers designated to hammer out policy details, Carter and Lamoureux were the generals tasked with seeing that the legislation got the needed supermajority. Both were seen as relative moderates within the party who had been at least open-minded about the expansion question and both had strong working relationships with Beebe. Lamoureux had a calm and forbearing style, nicknamed the "principal" because of his peacekeeping role in the Senate, where the often touchy and cantankerous members could resemble a high-school class.

Carter, meanwhile, was fiery, impatient with inaction and occasionally impulsive. He was the first Republican lawmaker to publicly endorse the new approach and once he did, his hyper-competitive drive was key in wrangling the needed votes. There is a broad consensus on both sides of the aisle that expansion never would have happened without Carter as speaker. But prior to the private option, he could run hot and cold. According to multiple lawmakers, during the debate over traditional Medicaid expansion, he was prepared on several occasions to announce that expansion simply was not going to happen, before being talked down. On the other hand, the week before finding out about the private option, he may have been close to endorsing traditional Medicaid expansion. According to multiple lawmakers, Carter approached the Democratic leadership about striking a deal — if he rallied support for full Medicaid expansion, would they rally support for a capital gains tax cut? Carter met that week with former Medicaid director Ray Hanley, an expansion advocate. In an email to Selig, Hanley wrote, "clear to me [Carter] is looking for a path forward on expansion. ... Told him I could actually make case that expansion is the 'antiObamacare.' ... He liked that." (Carter remembers the meeting with Hanley but doesn't remember that discussion; he said does not recall either considering an announcement taking expansion off the table or approaching Democrats about a deal.)

Once the private option was announced, it seemed for a little while like getting the votes wouldn't be nearly the slog that everyone had anticipated. In the first month or so, there was very little in the way of conservative criticism of the plan in the state. Few had stronger anti-Obamacare bona fides and conservative cred than Burris, Dismang and Sanders, and they were very effective pitchmen within the party. Even ultra-right-wingers like Rep. Nate Bell (R-Mena) were talking positively about the private option (Bell eventually voted against it).

But as the bills were filed and started to work their way through committee, the tide began to turn on the right. Tea Party activists began grumbling, and some Republican legislators announced that they were still not satisfied with the new approach. The Arkansas chapter of Americans for Prosperity, the conservative advocacy group that spent more than a million dollars in the last legislative election, was cagey for weeks after the private option was announced, but came out against it in early April, complete with an advertisement featuring Nancy Pelosi that almost felt nostalgic. They peppered town halls and social media with objections from the right flank, and even flew in a former Romney healthcare advisor to address a small town hall in Benton the night before the vote in the House.

In the final weeks, House Majority Leader Bruce Westerman (R-Hot Springs), originally a co-sponsor on the bills, came out against the plan. He had always been the most skeptical of the group involved; his preferred approach to problems was geared more toward "cut" than "reform." Although he knows the numbers well enough to know that the choice to expand has no meaningful impact on the national debt, he has always had what he calls a moral objection to accepting federal deficit spending. Perhaps Westerman could simply never get past that. But there may also have been a political calculation — his decision came shortly after AFP's announcement and in the wake of burgeoning opposition among the Tea Party faithful. If Westerman, who had worked alongside the bill's architects and seemed to give tacit approval about the direction they were going, could swoop in to kill the private option, he'd emerge as a hero to right-wingers dead set against any form of expansion.

While the major three Republicans behind the bill were magnanimous about Westerman's move, many other lawmakers in their caucus were furious. Some privately speculated that Westerman had thrown his colleagues — who had taken considerable political risk — under the bus in order to pursue a run for Congress in the Fourth District (which may have an open seat if U.S. Rep. Tom Cotton decides to run for Senate).

Townhalls were hastily scheduled in the weeks before the vote, and anxious observers on both sides checked in on members' Facebook and Twitter accounts to see if positions were flipping. In the hallways at the Capitol, "what's your count?" replaced "hello" as the greeting. The truth was that by the time you heard a count, it had already shifted, as legislators changed their minds by the hour. It was like "trying to nail Jell-O to the wall," one lobbyist said. As many as 20 votes in the House were considered in play by both sides as it came down to the wire.

The debates often felt more like a conservative political conference than a state legislature nearly evenly divided by party. Republicans debated Republicans about the future of the Republican Party. Democrats were almost totally silent. This was by design — the situation was viewed as so delicate for Republicans accepting money from the federal healthcare law that any voice from the left was seen as risky business. "If we were hashing it out with them in the mix it wouldn't have happened," Lamoureux says. "For 15 weeks, to hold their breath, that's discipline. They were able to do what they needed to do, not what they wanted to." The Democrats would have to be content to be the unsung heroes biting their tongues, the base votes that never wavered. "The end goal was the important thing," Democratic Majority Leader Greg Leding (D-Fayetteville) said. "Let's get these quarter million people insured."

For Republicans, things got testy, and things got personal. Kenneth Ryan James, a former flack for Congressman Tim Griffin ostensibly working as a consultant for the Republican caucus, allied himself with Westerman and was heard to say, after the House delayed consideration of the bill when supporters didn't have the votes, "Bruce 1, Davy 0." Some Republicans loyal to Rep. Terry Rice (R-Waldron), who had run for speaker only to have Carter usurp the office with Democratic support, reportedly refused to support expansion out of spite over Carter. Expansion opponents claimed shady arm-twisting, and Westerman accused unnamed colleagues of betraying their principles for "30 pieces of silver."

On the Senate side, key lawmakers had to be kept away from Sen. Missy Irvin to avoid a frustrated shouting match on the morning of the vote. Irvin had previously lobbied House members to vote for the private option, then surprised expansion proponents by flipping to a no. That morning, she announced she could be a yes if they would consider some changes, based on hand-written notes that she had only a hazy understanding of. When lawmakers objected to the last-minute shenanigans, she responded, "Do you want my vote or not?" Cooler heads prevailed and Sanders, Burris, and Allison were called in to get last-minute amendments added. They represented no significant substantive change; one of them was to add Irvin's name to the bill.

In the end, the bills passed with two votes to spare in the House and one to spare in the Senate. The most powerful voices bringing Republicans on board to offer a safety net for the working poor came from three bellicose hard-liners who never met a government program they didn't want to cut. To this day, they fall into involuntary tics of apocalyptic fear when the Affordable Care Act comes up (Burris: "it's the worst ... a terrible, terrible, terrible bill ... it's going to have wrecking implications"; Sanders: "can't stand it ... atrocious ... worst legislation passed, easily, in the last 50 years").

Of course, the private option takes advantage of federal funding that comes out of the ACA and uses a key tenet of the ACA — subsidized healthcare exchanges — to achieve coverage. Spinners on every side will be working overtime, with dramatic talk of capitulating to Obamacare, saving us from Obamacare and everything in between.

All of which will likely be so much noise to the folks in this state who will no longer be going without health insurance because they can't afford it. If politics is the art of the possible, we've seen some serious artistry in the last few months. That's what this story is about, but it's not why it matters. Arkansas is one of the stingiest states in the nation when it comes to covering the healthcare of its poorest citizens; come Jan. 1, that will no longer be true. Of course the road was circuitous and maddening, to a destination as improbable as that.

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