No, there is a not a "bailout" for the Arkansas private option | Arkansas Blog

Monday, May 19, 2014

No, there is a not a "bailout" for the Arkansas private option

Posted By on Mon, May 19, 2014 at 12:02 PM

I’ve heard that if you call something a “bailout,” people won’t like it! This is the approach taken in a piece on the private option posted last week at Forbes. It is the third article Forbes has published in the last month or so criticizing the Arkansas plan – which uses Medicaid funds to purchase private health insurance for low-income Arkansans –  all of them penned by Josh Archambault and Jonathan Ingram, who work for the Florida-based Foundation for Government Accountability (FGA), an advocacy group largely devoted to opposition to the Affordable Care Act and Medicaid expansion throughout the country, which has focused particular attention on opposition to the Arkansas private option.

The latest article again focuses on the per-person costs thus far of the private option, an issue I did a deep-dive look at here. I’ll get to the cost issue in a moment, but first a couple of comments on insinuations in the article which do not comport with facts on the ground in Arkansas. 

No, Andy Allison did not resign because right-wing opponents wrote articles criticizing the private option

Most would read the headline of the latest Forbes piece – “Arkansas' Medicaid 'Private Option' To Seek Federal Bailout For Large Cost Overruns; Director Resigns" and conclude that Medicaid Director Andy Allison chose to step down next month because of some kind of controversy related to the private option. Or that he resigned under pressure because the policy wasn’t going as planned. There is zero evidence for this. To the contrary, no one called for Allison to resign and both administration officials and Republican backers of the private option wanted him to stay on (here is Allison himself discussing his decision to go into the private sector). Critics of the policy who opposed it from the get-go have understandably not always been Allison’s biggest fans (though even private option opponent Rep. David Meeks told the D-G "I think he did his job like he’s supposed to"), but proponents of the policy —those who actually wish to see it succeed — have been quite happy with its implementation and management by Allison. This is nothing like the botched rollout of healthcare.gov, as the authors attempt to imply. The rollout of the private option has gone successfully from the perspective of the policy's backers (for example, unlike healthcare.gov, the state's enrollment process was enacted without a hitch) — the complaints have come from those who never wanted to see the policy established in the first place.  

"Following several months of negative press focused on cost overruns and other problems with the Private Option, Arkansas Medicaid Director Andy Allison abruptly resigned in early May," the Forbes authors write. The authors don't mention that the negative press amounts to these Forbes articles written by the authors themselves and blog items written by FGA staffers, plus a Washington Times editorial that used the same language and arguments that FGA has been using. FGA is an advocacy group dedicated to fighting tooth and nail against Obamacare and Medicaid expansion in any form, and has been heavily involved in battling the private option in Arkansas. And that’s fine! But it’s hardly surprising that those who have bitterly opposed the private option from the beginning continue to oppose it. It's a bit rich to hear the same arguments from the same people we've been hearing for a year pitched as some kind of "buyer's remorse."

Here in Arkansas, most residents would be surprised to hear a claim of "months of negative press." In fact, Sen. Bryan King, one of the most vocal opponents of the private option, griped recently that his "message is not getting out there." Speaking with reporters afterwards, King complained at length that the media coverage of the private option had been overwhelmingly positive. The Arkansas press has certainly noted that the per-person costs of the private option thus far have been higher (by about 4 percent for the year) than the targets set in the federal waiver — though media accounts have also explained that the rules of the waiver make the state exceedingly unlikely to be on the hook for the difference and have noted the arguments from state officials and Republican backers of the private option on plans to curb costs in the future. But both the local and national press has also reported on other aspects of the private option not mentioned in the Forbes articles: just four months in, more than 155,000 low-income Arkansans have gained coverage under the private option, with the enrollment process going as smoothly as proponents could have hoped — that represents a whopping 74 percent of the eligible uninsured population, likely making a big dent in the state's uninsurance rate; the private option population makes up around three quarters (a proportion that will likely grow) of the Arkansas Health Insurance Marketplacestabilizing the marketplace where other Arkansans shop for health insurance; the private option population leans dramatically younger, with the result that Arkansas has the second youngest ACA marketplace in the nation, likely leading to lower premiums going forward; four carriers have announced plans to sell statewide next yearvery preliminary data from a survey of acute care hospitals suggests a reduction in the number of uninsured patients. Per-person costs are an important part of evaluating the private option, but so are the policy's impacts on the state and its citizens. 

Again, Allison explains his reasons for stepping down here. If you want to speculate beyond that, I think the plausible answer is that a Medicaid director who's gotten national attention for implementing a unique policy might be inclined to cash out for a plush, research-oriented private sector or academic job rather than answer the exact same questions from the same group of half a dozen lawmakers over and over at tedious meetings. Not so plausible: The notion that Allison resigned because of these Forbes posts or an editorial in the Washington Times, gleefully passed around on social media among those who already opposed the policy (a different FGA staffer noted portentously that Allison's announcement came two days after the editorial was published — "make of it what you will"!). And the notion that Allison was forced out by the administration, like Sebelius taking the fall for healthcare.gov —  that's just laughable to anyone who has been communicating with the state officials and lawmakers involved in implementing the private option. 

I called Matt DeCample, spokesman for Gov. Mike Beebe, to get his take. “That’s ridiculous, as are most of the claims made by those writers," DeCample said. “Andy’s leaving to go into the private sector because his success has garnered him other opportunities. We wish he wasn’t going. He is doing a fantastic job with the private option.” Decample said that any implication that Allison was leaving for any reason outside his personal choice was “completely fabricated.”

I will say that the inclusion of the Sebelius bogeywoman in the Forbes article was a nice touch — Allison used to work for the Medicaid program in Kansas, overlapping with the tail end of Sebelius's term as governor..."perhaps coincidentally," they write. Perhaps!  

No, the private option is not “politically toxic” in Arkansas
The FGA authors also argue that the private option, which has twice passed both houses of the legislature by bipartisan supermajority, has become “politically toxic.” Hmm. No lawmaker who supported the policy in 2014 has publicly reversed positions (a scattering who voted for it in 2013 flip-flopped in 2014; though a scattering also flipped votes the other way). Several who voted for the policy this year are now battling in Republican primaries, yet all still support the private option and say they would vote for it again. If the private option is “politically toxic,” the behavior in statewide races of Republicans Rep. Tom Cotton, currently running for U.S. Senate and Asa Hutchinson, currently running for governor, is very odd indeed. Cotton has steadfastly refused to take a position on the private option. Hutchison bobbed and weaved dodging the question for months before finally saying, after the policy was re-authorized, that he "of course" supported it because it was "the law of the land" but considered it a "pilot program." This despite the fact that Huthcinson has a primary opponent vehemently opposed to the private option who attacked Hutchinson's mild support during the debate between two. I don't think you need to do too much tea-leaf reading to make sense of all this hedging from Cotton and Hutchinson, about to face tough statewide battles: their base hates the private option, but the policy likely remains popular — certainly not toxic — among many independents and in the electorate in the state overall. 

The Forbes piece uses some oddly cherry-picked or misleading examples to describe the political lay of the land in Arkansas. Hilariously, the authors write that “[w]hen the bill originally passed the Arkansas House, only a minority of Republicans voted in favor of the plan” and reference a 2013 vote in one chamber on the enabling legislation, which needed only a simple majority. This vote, never in doubt, was a side note in the legislative drama and on the vote in question, a number of Republican supporters of the private option — including House Speaker Davy Carter, perhaps the most outspoken Republican supporter of the policy — did not vote, as often happens when the result is a foregone conclusion. To suggest this particular vote represented a lack of support from GOPs (like Carter!) is wildly misleading. The vote that was hotly contested and actually put the private option into effect was the appropriation. For some reason, the FGA authors do not inform readers that a majority of Republican lawmakers in both the House and the Senate voted for the private option appropriation in both 2013 and 2014. Whatever the reason for the omission, readers are left with the opposite impression of what actually happened in the Arkansas General Assembly. Several other examples purporting to show the political tides turning have similar problems — they reference a tweet about strategy from a Republican senator without mentioning that the senator in question continues to support the private option; there's a reference to a state Senate seat previously held by a Democrat, who resigned in disgrace, won by an anti-private option Republican in a special election — without mention that legislative seats long held by Democrats have been steadily flipping to Republican in Arkansas for years. We're told that a key Republican architect of the plan "now says he 'opposes'" the private option; in fact, Rep. John Burris continues to support and vocally argue for the policy. The reference is to Burris saying precisely the same thing he always has — that the private option is fundamentally different than traditional Medicaid expansion, which he opposes. FGA believes that distinction is ridiculous and that the lawmakers aren’t owning their votes, but Burris is not "trying to backtrack" and this is nothing new – it’s the exact same intra-party squabble that has played out since the private option first emerged.

The over-selling and obfuscation in the Forbes piece is curious since there is no doubt that the private option remains deeply controversial and a potential political liability for supporters in Republican primariesHere are some reports we've done on that very topic. We'll find out just how dicey the private option is for GOP incumbents tomorrow — four lawmakers who voted for the private option are facing tough primaries in the state Senate, as well as several in the House; meanwhile, representatives who voted for the private option are also running for statewide office for treasurer and auditor and facing primary challenges attacking them on the private option. Certainly Republican lawmakers attempting to make a political calculation on the private option will be watching closely. 

Either way, something like 70-77 percent of the legislature will likely support the policy in 2015, just as in 2013 and 2014 — but the margins are incredibly tight because a 75 percent supermajority is needed due to the unique Arkansas constitution. Of course, if 74 percent of the legislature supports it and the private option falls short, expect a piece arguing that other states should take heed from Arkansas, which came to regret the monstrosity, etc.  

No, the state using the rules explicitly laid out in the waiver for the private option does not represent a “bailout”
Here’s where things stand on private option costs: The per-person, per-month (PMPM) cost for the private option in 2014 is approximately $496 (through May 8; this is inclusive of approximately $6 per month in wraparound costs). This is running about 4 percent higher than what the feds budgeted for 2014 in their approval of the waiver to pursue the private option (about $477). For each year, the feds set a per-person budget neutrality cap – over the three-year life of the waiver, the state is supposed to stay under the caps. But the waiver explicitly gives the states some latitude; these were never hard caps. Here’s the language from the waiver:

If the State's experience of the take up rate for the new adult group and other factors that affect the costs of this population indicates that the PMPM limit described above...may underestimate the actual costs of medical assistance for the new adult group, the State may submit an adjustment....

The purpose of these targets is ostensibly to keep the state from spending more on the waiver program than they would have on traditional Medicaid expansion, a somewhat unknowable counterfactual. (The controversial part is that the state was given leeway in the first place to pursue an experiment that could turn out to be costlier — the feds accepted the Arkansas hypothesis that reimbursement rates would be the same either way.) 

The state will likely ask the feds for an adjustment to the 2014 cap because their actuaries predicted the average age to be two years lower than it's turned out to be. If an adjustment is made to reflect the actual age of enrollees, Arkansas will be under the cap. Again, this was never a block grant (as the FGA authors point out repeatedly elsewhere). The rules of the waiver are about the Medicaid counterfactual — if the demographics are different than what was predicted, that would impact the cost, whether it was traditional Medicaid or the private option. It's perfectly legitimate to complain about the inherently fudgey budget neutrality agreements in Medicaid waivers, but this is neither a "bailout" nor something new or unexpected, it's just the way the waiver works. The authors' previous piece in Forbes misled their readers with the claim "State Taxpayers To Pay Tens Of Millions."

Any Medicaid program — expansion or not — has somewhat unpredictable costs depending on how many enroll, the demographics of those who do, their cost of care, etc. If the costs come in higher than expected, the feds aren't "bailing out" a state by paying their share, they're fulfilling their obligation under the Medicaid law. It's true that the private option waiver establishes a per-person budget intended to be equivalent to what traditional Medicaid expansion would have cost and makes the state liable for overruns. But the same waiver explicitly allows the state to request adjustments to that per-person budget if the population is different than predicted (and thus would have made the theoretical cost of traditional Medicaid expansion different)...exactly what Arkansas is likely to do. 

From a federal budgetary standpoint, if the gross federal costs are incrementally higher than expected over the 3-year life of the waiver, I think this remains a worthy experiment. Mileage will vary. The bigger question — does this cost more than traditional Medicaid and how much — will not be answered by the budget neutrality caps (here's the evaluation plan that will look at that question and others). 

You can read much more on these issues, as well on the projections from Optumas, the actuarial firm hired by the state, in this post. Two things to keep in mind as you read about costs: 1) We don’t actually know whether these PMPM costs are accurate yet and won’t until we find out next year whether there was a medical loss ratio adjustment. 2) State officials will have policy tools at their disposal to impact costs going forward. The state’s budget neutrality tests and cost-effectiveness evaluations are conducted over the three-year life of the waiver, and the private option will likely look significantly different in 2016 than it does this year.

While the budget neutrality caps are a bit of a red herring, the state absolutely needs to be aggressive about monitoring costs and managing the private option because Arkansas will start chipping in 5 percent of costs of coverage in 2017 if the private option continues, up to 10 percent by 2020. Expect to see policy changes to curb costs: starting in 2015, state officials plan to only allow private option beneficiaries to select among plans that exclusively offer the ten essential health benefits (EHBs) mandated by the law, with no additional bells and whistles; DHS officials have said that some form of competitive bidding is coming down the pipeline.  

If you read the article in Forbes, you might conclude that the private option is some sort of slowly unfolding disaster horrifying Arkansas citizens and lawmakers alike. Resignations! Bailouts! Toxic! In fact, those who supported the policy continue to support the policy and broadly consider it a success so far; those who opposed the policy continue to oppose the policy and broadly consider it a failure so far. We have very preliminary data, some positive, some negative, and some open to interpretation. It's still too early to evaluate how well the private option is "working" overall — unless the legislature backs out, the state has three federally funded years to pursue this experiment, and of course different folks will measure success differently. The gross costs of the coverage must be part of that discussion, but so too must the benefits, including those Arkansans who now have health insurance thanks to the private option. 

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