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Medicaid and politics 

Task force says keep expansion, but make major cuts.

click to enlarge RUBBER STAMPED: Hutchinson's recommendations move on.
  • RUBBER STAMPED: Hutchinson's recommendations move on.

The Health Reform Legislative Task Force wrapped up nearly a year of meetings last week, issuing its final recommendations. Those recommendations basically boil down to two things: 1) the private option should continue, with some conservative bells and whistles added to the policy and 2) the state should seek reforms to the traditional Medicaid program that will save $835 million over five years, a benchmark set by Gov. Asa Hutchinson. How should those savings be achieved? On that politically thorny question, the task force and the governor kicked the can down the road.

As it happens, these are the same two goals Hutchinson has articulated since coming into office and the same courses of action he asked for when he spoke to the task force last week. The task force was ostensibly created to make recommendations to the governor, but in practice, it rubber-stamped the governor's recommendations.

What we are seeing now is the political wheels grinding along to achieve Hutchinson's big objectives: keep Obamacare money flowing into the state to fund the private option and pull off the major Medicaid reforms that eluded his predecessor, particularly changing the way that the program offers long-term services and supports for its costliest patients.

Let's take a step back and take a look at how we got here. You might recall that Hutchinson, shortly after taking office, had a bright idea about the future of the Medicaid program in Arkansas.

Back in 2013, Arkansas chose to accept billions of dollars in federal Obamacare money to offer health insurance to more than 200,000 low-income Arkansans. It did so under a unique privatized version of Medicaid expansion developed by Republican lawmakers, which became known as the "private option." The private option cut the state's uninsured rate in half, saved hospitals hundreds of millions of dollars in uncompensated care, and poured billions of federal dollars into the state economy. Perhaps most importantly for Hutchinson, who had visions of tax cuts dancing in his head, the private option saved hundreds of millions of dollars for the state budget.

For all of those reasons (not to mention the political nightmare of kicking hundreds of thousands of Arkansans off of their health insurance), Hutchinson wanted to keep the private option around. Politically, that was a problem. The private option needs annual approval from three quarters of the legislature, and a whole lot of Republican legislators had just been elected by running against Obamacare — many of them loudly and explicitly opposing the private option.

"The phrase 'private option' itself has become politically toxic," the governor fretted in a major health care speech shortly after taking office in January. "So much so that it's almost impossible to have a constructive conversation about health care reform without passions rising and folks taking sides." 

The governor's bright idea: Create a task force! Hutchinson got the Obamacare-hating legislature to approve the private option for two more years (2015 and 2016); the task force, he promised, would come up with some sort of alternative to the private option for 2017 and beyond.

Since the task force was supposed to recommend a plan that would maintain coverage for those currently covered by the private option, there was no mystery about where all of this was heading. There's just no affordable and workable way for the state to cover those folks without accepting the billions of dollars in federal Medicaid expansion money. Unless Arkansas lawmakers wanted to send out a couple hundred thousand cancellation letters, they were going to have to learn to love Obamacare.

And sure enough, after spending more than a million dollars to hire a consultant, the Stephen Group, and after countless hours of meetings and hundreds of pages of reports, the task force arrived at the conclusion that was obvious when it began. The private option is a great fiscal deal for the state and getting rid of it would blow a hole in the state budget. And there is no magic alternative, no secret plan, no stone unturned: If you want to maintain coverage for all these folks, Obamacare's Medicaid expansion is the only way. Surprise, surprise.

That's not to say that the task force was without value. After years of promising that there was a "better way," opponents of the private option were forced to put up or shut up. The task force offered the opportunity to name and detail alternative plans. Predictably, they came up empty. The task force process forced lawmakers to dig in to the numbers themselves and take ownership of policy choices. The result: Lawmakers like Rep. Joe Farrer (R-Austin), Rep. David Meeks (R-Conway) and Sen. John Cooper (R-Jonesboro) — previously diehard opponents of the private option — recommended that the governor begin negotiations with the federal government to continue the private option in 2017 and beyond.

Mind you, neither Hutchinson nor Meeks and company will call it the private option, that "politically toxic" moniker. Instead, the governor has rebranded the program "Arkansas Works."

In order to make it politically palatable to Republican lawmakers, Arkansas Works will feature some tweaks to the policy. Beneficiaries will have carrot-and-stick incentives to participate in best wellness practices (like visiting a primary care physician after signing up) and work referral or job training programs. Certain beneficiaries who fail to participate could be subject to small monthly premiums. The governor also plans to initiate a complicated scheme to tie the private option to employer-sponsored insurance for certain beneficiaries.

None of this is new. These are the conservative add-ons that Hutchinson pitched way back in January and that everyone understood would be necessary in order to get Republican support for continuation of the policy. Indeed, these are precisely the sorts of incremental conservative changes that the Republican backers of the private option publicly envisioned when they pushed the original law back in 2013. This isn't a change in course; it's a continuation of the plan. 

Some of the governor's proposals are bad or counterproductive policies that could create more bureaucracy and harm access to care for poor people. In many cases, they'll create real burdens for real people for no good reason. But in the context of a multibillion-dollar coverage expansion, this is really just fiddling at the margins. The governor and the legislature can call it whatever they want, but make no mistake: This is still the private option. It's still Medicaid expansion. And the whole thing is still funded by ... Obamacare.

The governor has to get approval for all of these bells and whistles from the federal government, and negotiations will now commence. In some cases, the governor will make the pitch on ideas he likes but that the feds will refuse — the Obama administration has been clear that it will not allow an asset test for eligibility or a requirement that beneficiaries have a job. Hutchinson knows that these are going nowhere, but he'll make a show of asking, for the benefit of right-wing legislators whose votes he needs.

Once the governor hammers out a deal, the legislature will convene for a special session, some time after the primaries in March. Getting approval to keep Obamacare money flowing and continue the private option will always be an uphill climb given the makeup of the legislature and the supermajority requirement, but the governor has set his plan in motion. He now has the stamp of approval from the task force, featuring seven prominent lawmakers who voted against the private option in the past. And he's pushing his re-branding effort hard, telling anyone who'll listen: "Please understand very carefully that on Dec. 31, 2016, the private option ends." Next spring, legislators who promised to kill the private option get to kill the "private option" and vote for "Arkansas Works" instead! 

Meanwhile, Hutchinson is also seeking significant reforms to the traditional Medicaid program (that is, the pre-existing program, everything other than the private option). For political reasons, Hutchinson is trying to tie this objective to the private option coverage expansion, but they're really separate issues.

Certain high-cost populations — long-term care for the elderly and the severely disabled, care for the developmentally disabled and behavioral health — make up three quarters of spending in the traditional Medicaid program. Completely aside from the state's decision on Medicaid expansion, the Department of Human Services has been noting for years, dating back to the Beebe administration, that Medicaid spending on these high-cost populations was on an unsustainable path. In many cases, providers reimbursed on a fee-for-service basis may have been incentivized for treatments that helped their bottom line even if they weren't best practices in terms of high-quality care for patients. The Stephen Group report convincingly makes the case that beneficiaries are often ending up in more expensive nursing-home institutions when they would they would prefer to be in home- or community-based care more appropriate to their needs. The report found that "rebalancing" for these high-cost populations — shifting Medicaid investment from institutional care to home-and-community-based care — would save hundreds of millions of dollars.

The solution endorsed by the Stephen Group is a move away from the current fee-for-service model: more care coordination, incentives for providers to provide cost-effective and high-quality care, and moving away from overreliance on nursing homes via "rebalancing." DHS under the Beebe administration tried to take some steps in this direction, but lobbyists for provider groups — particularly the powerful nursing home lobby — proved adept at dodging reforms whenever new rules and regulations worked their way through the legislative process.

The Stephen Group report found that using managed care companies to initiate these reforms for the high-cost populations would save nearly $2 billion over five years; an alternative approach implemented and coordinated by state agencies (and vendors they subcontract with) would save around $700 million, the report found.

The governor and DHS officials backed the managed care path, but this proved highly controversial among some lawmakers — particularly a group of five legislators on the task force who are providers themselves. If you want an idea of the nursing home lobby's political muscle, consider that when it initially appeared that the task force might endorse the managed care plan, Hutchinson cut a side deal to carve out the nursing homes and allow them to come up with their own plan for savings.

In the end, Hutchinson opted to punt on the managed care question. Instead, he gave a target: $835 million in savings between 2017 and 2021. That amounts to $250 million in savings for the state coffers (the feds cover 70 percent of these costs). Hutchinson claimed, dubiously, that these savings were necessary to pay for the private option. In fact, the Stephen Group found that the private option saves money for the state on net, even when the state has to start paying its full 10 percent share. Hutchinson is plowing the current savings into tax cuts, without a thought to the state's share of private option costs down the road. The truth is that the governor wants to achieve savings in the traditional Medicaid program because he wants to achieve savings in the traditional Medicaid program. It has nothing to do with whether the state continues the private option or not.

As to the question of how to get those savings, the governor said that he was "agnostic." The savings had to be "credible" and ensure high-quality care for beneficiaries, he said. And they have to hit his $835 million benchmark. The means to reach that goal? To be determined. 

The task force, in other words, answered the obvious questions, but left the hard questions for 2016. While there are compelling policy arguments for reforming the ways that the traditional Medicaid program offers care to these high-cost populations, there's no getting around the fact that hundreds of millions in savings means hundreds of millions of dollars less in health care spending. Current stakeholders are going to fight for their piece of the pie. How will an effort at "rebalancing," for example, impact nursing homes' bottom lines? That's worth keeping in mind next year as provider groups offer their own plans for meeting the governor's benchmarks.

For all of the fireworks over the private option, it's actually just one piece of the state's Medicaid spending. Next year's fight will be over the shape of the Medicaid program for its costliest and neediest beneficiaries, with billions of dollars at stake. The political battles ahead will be fierce. Cue the lobbyists.

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

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