Costs for "private option" for Medicaid expansion coming in on target; DHS preparing request for HSAs | Arkansas Blog

Thursday, January 16, 2014

Costs for "private option" for Medicaid expansion coming in on target; DHS preparing request for HSAs

Posted By on Thu, Jan 16, 2014 at 10:54 PM

click to enlarge READY TO DEBATE THE "PRIVATE OPTION" ALL OVER AGAIN? DHS Director John Selig chats with Senate Public Health Chair Cecile Bledsoe. - BRIAN CHILSON
  • Brian Chilson
  • READY TO DEBATE THE "PRIVATE OPTION" ALL OVER AGAIN? DHS Director John Selig chats with Senate Public Health Chair Cecile Bledsoe.

The average monthly cost for “private option” enrollees thus far is $476, officials from the Department of Human Services testified today before the joint Public Health Committee. That figure — based on plan premium  and cost-sharing reduction costs for enrollees through December 15 — comes in very close to $472, the number projected for 2014 by actuaries when Arkansas developed the policy framework for the “private option.”

In short, the policy appears to be on track in terms of cost. Given that those same actuaries projected that the state would save more than $600 million over the next ten years via the “private option” that’s very good news.

The current average monthly per capita cost of $476 is just a hair under the budget neutrality cap for 2014 — $477.63 — imposed by the federal government as part of the waiver which allowed the "private option" policy. Averaged over the course of three years, the state needs to stay under its yearly per capita caps or it will be on the hook to the feds for the difference (the caps can be adjusted and in practice it's exceedingly rare for a state to pay money back to the feds after a Medicaid demonstration waiver—more details here). 

Also today the Public Health Committee heard testimony from former Utah governor and Bush administration official Michael Leavitt

The state has contracted with Leavitt, who served as U.S. Secretary of Health and Human Services under President George W. Bush, to help with the process of applying for additional amendments to the "private option" waiver. The Healthcare Independence Act, the law which established the "private option," mandates that state health officials pursue requests to the feds to allow some cost-sharing for people down to 50 percent of FPL, transition some people currently in traditional Medicaid to the "private option," and offer Health Savings Accounts (HSAs) as an option for "private option" beneficiaries.

The priority is on the HSAs — vocally championed by Sen. Missy Irvin, a last-minute YES vote to the "private option" last spring and likely a key swing vote in the coming fiscal session. DHS officials hope to establish HSAs as an option in 2015, and are aiming to send an amendment request to the feds during the fiscal session. A number of lawmakers I spoke with today said they could only continue to support the "private option" if there were (unnamed) tweaks. Perhaps this amendment will fit the bill. Just what form the HSA will take is hazy at this time (small contributions in lieu of cost sharing? the ability to cash out some amount not spent on medical services?) 

Leavitt said that HSAs would encourage "private option" beneficiaries to "begin to act as consumers. That has demonstrated over time it will constrain the cost." 

While ostensibly there to speak on the coming amendments, Leavitt largely took the opportunity to make a federalist pitch (aimed clearly at a Republican audience) on the virtues of the "private option." Obamacare was bad bad bad, he said, but states now had a unique opportunity for making changes to the healthcare system. 

I am of the strong view that much of what is wrong with our country can be fixed if more opportunity is provided by states...I wanted to tell you how valuable what you're doing is... The United States are watching. This is not just pioneering, it is truly transforming. It’s using government for what government should be done for [and] allowing the marketplace to begin to work in a way that will be in fact transformative. Different things have come together to present this opportunity.

The more flexibility the federal government gives the states, the more reform that will be there. That’s a historic tension that’s gone on a long time. But the reason I have come here is that this is a very important moment not just for Arkansas, but for other states. What happened is that through whatever circumstances you’ve been able to get it done. You’ve got the federal government to agree to a series of reforms that they up to this point have not been willing to do. And there are lots of other states who are seeing that flexibility. If it’s done well and done continuously, that’s the way reform happens in this state-federal system. A state gets it done. Others begin to follow. And it begins to change. Frankly that’s the way reform has to happen. … There’s an opportunity here. A state innovates and people follow. This is a viral process. It’s the laboratories of democracy. If it happens in the Arkansas laboratory and it works, other states are going to follow. That’s the way reform happens and that’s the power of states. You couldn’t get the federal government to do this countrywide. But you can do it in Arkansas. And when you do, others will follow. 

Rah rah! I suspect that this basic frame — Arkansas pursuing an experiment to reform health care and the Medicaid program — was appealing to Republicans who voted for the "private option," and hanging on to those votes is the key to the policy's survival. (I thought of Sarah Kliff of the Washington Post asking, "Could Obamacare make Medicaid more Republican?") 

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