- Associated Press - Wednesday, September 10, 2014

LITTLE ROCK, Ark. (AP) - In a Sept. 8 story on Arkansas’ so-called private option Medicaid system, The Associated Press erroneously reported that Pennsylvania had a request pending to operate its program in a similar manner. The U.S. Department of Health and Human Services approved Pennsylvania’s request on Aug. 28.

A corrected version of the story is below:

GAO: Arkansas Medicaid plan not revenue-neutral

GAO says Arkansas’ ‘private option’ to cost extra $778 million; DHHS, plan supporters disagree


Associated Press

LITTLE ROCK, Ark. (AP) - Arkansas’ Medicaid expansion plan, in which the state uses federal dollars to buy private health insurance for its poorer residents, will cost taxpayers an extra $778 million over the next three years rather than being “revenue-neutral” to the federal budget, according to a government report released Monday. The plan’s supporters disputed the findings.

According to the U.S. General Accountability Office, the U.S. Department of Health and Human Services didn’t ensure that Arkansas’ “private option” Medicaid plan wouldn’t cost the federal government additional money. It said DHHS-imposed spending limits of $4 billion were about $778 million more than what would have been expected under the traditional fee-for-service Medicaid program.

The nation’s new health care law allowed states to expand Medicaid coverage to adults with incomes of up to 133 percent of the poverty line. Arkansas’ plan, initially approved in 2013 and reauthorized in March, was the first to seek permission to use Medicaid dollars to buy private insurance for the poor. State legislators will be asked to reauthorize it again next year.

Iowa is following a similar plan, and one for Pennsylvania was approved Aug. 28. New Hampshire and Utah have floated the idea.

The U.S. Department of Health and Human Services, along with Arkansas supporters of the private option plan, disagreed with the GAO’s findings.

“We are breaking new ground,” said state Sen. David Sanders, R-Little Rock. “Costs are coming down. It’s no longer a theoretical argument. We’re seeing it.”

In March 2016, Arkansas is to report on whether its poorer residents have had better access to health care with private insurance than they would have had under the traditional plan, in which the Medicaid system pays health care providers directly.

A spokesman for Gov. Mike Beebe said the report was prepared without anyone at the GAO contacting Arkansas for its input. Spokesman Matt DeCample said some extra costs are expected, but overall costs will be lower as the population becomes healthier.

“This was a report developed without contact with anyone on the ground in Arkansas. That $778 million is very abstract,” DeCample said. “If you’re going to build the infrastructure to serve 200,000 more people, you’re going to have increased costs. … Not all costs are continuing costs.”

Beebe’s office said last month that premiums in the state’s health care exchange would drop an average of 2 percent for 2015. Sanders noted then that policyholders have tended to be younger and healthier.

In its response to the GAO, DHHS said that while it typically would have used historic data to demonstrate costs under the traditional Medicaid program, it let Arkansas use market prices for a population similar to those who will be covered.

The GAO report said Arkansas’ test could be successful but that DHHS shouldn’t have given Arkansas the ability to adjust spending limits if its costs prove higher - or expand that ability to other states.

“Arkansas’s demonstration may prove an important test of whether using Medicaid funds to finance coverage offered through exchanges will improve access to care and continuity of coverage,” the report said. “… If, as it did with Arkansas, HHS allows states to use an approach to expanding Medicaid that is expected to cost more than expansion under the existing Medicaid program with fewer cost controls in place, there could be significant cost implications for the federal government.”

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