The ultimate Obamacare irony? Guessing at why HHS okayed expensive "private option" | Arkansas Blog

Monday, March 11, 2013

The ultimate Obamacare irony? Guessing at why HHS okayed expensive "private option"

Posted By on Mon, Mar 11, 2013 at 1:00 PM

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The big mystery at the center of the “private option” is cost. The feds have okayed a plan for Arkansas that is going to expand coverage with a higher price tag. Other states are lining up to sign up for a similar plan.

The approach they’re using was discussed in Congress but dismissed because it would cost tens of billions more. Read that last sentence again! It seems crazy!

Yes, it’s an approach that the U.S. Department of Health and Human Services mentioned a while back, but that was for a very limited subset of the expansion population to address specific issues. It was certainly not thrown out there as an idea for the entire expansion pool.

Yet, after a long period of negotiation between Gov. Mike Beebe and Sec. Kathleen Sebelius, here we are. Those negotiations, of course, only happened because of demands from Arkansas Republicans who weren’t going to vote for expansion unless they could do it their way.

Ultimately, of course, the feds want states to say yes. They can’t achieve the goals of the Affordable Care Act without that.

But to get them to say yes, they’re jacking up the costs by a lot. It seems a bit curious that HHS would be game for what could be a budget-busting approach (and the whole maneuver looks fishy).

Here’s a guess, and it’s just a guess, that occurred to me after reading the statements of health policy expert Sara Rosenbaum. What if HHS simply believes that the overall cost of the ACA is going to be lower than originally projected? If they have more wiggle room to remain revenue neutral, they can opt for pricier forms of flexibility and creativity.

One thing Rosenbaum keeps bringing up when asked about the cost problem of the “private option” that seems like a total nonsequitor is the relative youth and health — the relatively low risk — of the expansion pool. It may be the case that this pool is healthier than they’re perceived to be, but that has nothing to do with the difference in cost between public and private. It just means, broadly speaking, that costs would be lower.

Well...maybe costs, broadly speaking, will be lower. The CBO estimate is old and projections on Medicaid spending have been revised downward, by hundreds of billions in total. I've heard arguments that the $6,000/$9,000 CBO projections, clearly too high for Arkansas, are too high nationally as well. Certainly the DHS projections I've use skew high on costs, by design (they wanted to be conservative about projected savings, though Republicans didn't believe them anyways). The rate of growth on healthcare spending nationally has slowed. The ACA itself may be playing a role in that, so the trend may continue even after the impact of the recession fades. When I asked the governor last week about the cost to feds, he speculated that they shouldn’t be too worried about higher costs because they were going to end up revenue positive due to Medicare reimbursement cuts and various revenue streams (and of course, the CBO has scored the ACA as revenue positive).

Again, I’m in wild-guess (and wishful thinking) mode here, but it follows that if you’re willing to spend more money, you think you’ve got the money to spend. Dunno. It would be an awfully big gamble by HHS.

If I’m half-right, marvel at the irony: perhaps Obamacare’s net savings are allowing Obamacare-hating Republicans to go forward with their shiny new “private option.”

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