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Medicaid expansion could save Arkansas $700 million 

According to new figures from the Arkansas Department of Human Services.

click to enlarge NEW NUMBERS: Could save nursing home cuts in Arkansas image
  • NEW NUMBERS: Could save nursing home cuts.

With the controversial question of Medicaid expansion and budget shortfalls looming over the upcoming legislative session, the latest analysis from the Arkansas Department of Human Services suggests that the expansion, part of federal health-care reform, would present even greater savings than they had previously projected.

Between 2014 and 2025, according to these latest projections, adopting Medicaid expansion would save the state more than $700 million. These savings would represent enough money over the next two years to save Level 3 nursing-facility care, currently slated for cuts to plug the state Medicaid program's impending fiscal hole. That hole — $138 million in 2014 and $75 million in 2015, even after factoring in contributions proposed by Gov. Mike Beebe from general revenue and surplus funds — threatens to end some programs and cut back others as well.

Last July, DHS released a study that suggested that Medicaid expansion would save the state $372 million between 2014 and 2021. The Washington Post lauded the projection as the "most detailed" analysis undertaken by a state on the impact of Medicaid expansion on the state budget.

However, the estimated savings that DHS now projects in 2014 and 2015 are greater than those reported in July. The increase is significant: $30 million, from $128 million to $158 million. The new numbers are based on updated projections developed by DHS this month in preparation for its budget hearing with the legislature.

The increase in savings projected in their new numbers is even more dramatic over the long haul. The headline number from the old report — $372 million in savings between 2014 and 2021 — is now up to $629 million. Moreover, while the old report suggested that the expansion would start costing the state money in 2021, the latest projection predicts continued savings year after year. By 2025, the total savings project to $713 million.

The rosier projections reflect a variety of factors. The biggest is the correction of an error in the original report that failed to account for federal matching money for administrative costs. The latest projection also includes increased savings from pregnant women transferring to the federally-financed expansion, and an increase in the estimated savings from uncompensated care as insurance coverage expands.

"We knew we would do a new estimate as we got new information from the Feds," DHS Director of Communications Amy Webb said in a phone interview Tuesday. "These are the numbers we'll be using moving forward."

If these projections are accurate, they represent good news for advocates of Medicaid expansion. Thus far, DHS has not been trumpeting the updated figures (its website has not been updated to reflect the new projection) other than the new numbers for 2014 and 2015.

Because of the budget shortfall predicted for those years, DHS recommended cuts to the legislature earlier this month to fill the gap. Arkansas Medicaid Director Andy Allison told reporters last week that the cuts were necessary but would cause "real harm." They include the elimination of Level 3 nursing-facility care, which would impact people that need extensive assistance but are able to do at least two of the following on their own: eating, moving, relieving themselves. Level 3 also includes people with Alzheimer's or dementia.

Beebe, who supports the Medicaid expansion, has argued that the savings projected from the expansion could be used to avoid the cuts to nursing-home care. Webb said that if Medicaid expansion is approved and helps close the shortfall, DHS would recommend saving the Level 3 nursing-home care. The numbers are close to a match. In fiscal year 2014, the savings represented by cutting Level 3 nursing care are $42 million, while the savings projected from Medicaid expansion are $44 million; in fiscal year 2015, the cuts to nursing-facility care are $101 million* while the savings from Medicaid expansion are $115 million.

In a speech Tuesday at the Clinton School of Public Service, Arkansas Surgeon General Joe Thompson said that Medicaid expansion would be "fiscally advantageous" and represented "the biggest stimulus package the state could get." He came to this conclusion even though he was using the outdated projections from July. Officials from DHS said that they did not get him the new numbers in time. Perhaps presciently, Thompson said that he thought the projected savings were "very conservative."

*This figure was originally reported as $116 million, an error.

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